Global Citizenship: Planning for Sustainable Growth a Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs

Home , Economic Citizenship, Global citizenship

Global Citizenship: Planning for Sustainable Growth A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs

No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. 2014-10 Contents

Preface 5 Introduction and Background 6 Definition, Scale and Scope 8 Trends and developments 10 Supply 10 Demand 10 Competition 11 Methods 12 Case selection 12 Towards an analytical framework 13 Investment requirements 14 Price point 14 Maturity 15 Choice of investment type 15 Job creation 16 Overview: investment requirements 17 Commitment requirements 19 Program type 20 Citizenship by Investment Programs: Physical presence for the application 20 Citizenship by Investment Programs: Interview or oath 20 Citizenship by Investment Programs: Physical presence for renewal of the passport 21 Immigrant Investor Programs: Years of residency 21 Immigrant Investor Programs: Days of physical presence 21 Immigrant Investor Programs: Citizenship/language test 22 Overview: commitment requirements 22 Transparency 24 Public support 24 Evaluation 25 Public data on the number of approved investors 25 Publicly available background data 25 Due diligence 26 Overview: transparency 27 Economic weight 29 GDP per capita 29 External debt per capita 30

3 Overview: economic weight 30 Social capacity 32 Population 32 Immigrant intake 32 Overview: social capacity 33 Combined scores 35 Case Assessments 36 Canada 36 United States 40 United Kingdom 43 New Zealand 46 Bulgaria 49 Saint Kitts and Nevis 51 Antigua and Barbuda 53 Recommendations 56 Preface

Arton Capital and the World Economic Forum - Global Migration Council are delighted to present this report. Our collaboration reinforces the strategy of the Global Agenda Council to engage private sector partners in the migration realm, and embodies Arton Capital’s commitment to the sustainable development of the global citizenship movement.

This report collates the latest available research and data on global citizenship programs – itself no mean feat – but it goes beyond a comprehensive overview of these programs. The report has three hallmarks. First, it is based on a large-scale comparative study, combining data and analysis from a representative range of countries around the world – to the best of our knowledge such an extensive survey has not been conducted before. Second, it is based on published resources and interviews conducted among principal stakeholders. This diversity of perspectives enhances its insights and analysis. Third, it maps a methodology for further research in this field; drawing on published research from a range of relevant disciplines, and identifying the range of stakeholders now involved in these programs.

The most enduring impact of this report, however, is its carefully elaborated analytical framework. This tool will need further refining and to be tested in other contexts, but it provides for the first time an analytical method to evaluate existing global citizenship programs and assess- es their impact; and guides the principled development of new programs. On the basis of this analysis, the report also concludes with a series of concrete recommendations targeted on government and industry partners.

We have deliberately pulled no punches in this report. There are still skeptics of global citizenship programs, and their voices are included here. There are countries that are not performing as well as others in developing clear guidelines on their programs, and these divergences are illustrated as well. Some of the biggest market players have been interviewed for this report, and their perspectives are reflected in pursuit of an objective approach and analyses of the set-up and the performance of global citizenship programs.

We would like to acknowledge the work of Mrs. Iris Hagemans at the University of Amsterdam, who conducted the research and analysis, and drafted this report.

It is a significant report, and we recommend it to you.

Dr. Khalid Koser Mr. Armand Arton Chair, Global Agenda Council on Migration President & CEO World Economic Forum Arton Capital

5 Introduction and background

Global citizenship programs have existed since the Although policymakers do turn to each other for ad- 1980s, when Saint Kitts and Nevis introduced their vice, there are currently no official forums or dialogues Citizenship by Investment Program in 1984 and Canada where different policymakers involved in global citizen- launched the Investor Class visa in 1986 – a program ship programs can share their experience and discuss that recently has been suspended. From the beginning, industry standards or best practices. The most important these have been highly divergent programs that offer platforms for knowledge-sharing are organized by the citizenship – directly or through residence – to a category growing industry around such programs, most notably a of migrants that later on became commonly referred to small number of market-leading corporations that assist as immigrant investors. international high net worth individuals looking for second residency and citizenship in their immigration and The Saint Kitts and Nevis program was introduced in investment decision.1 This has the potential to produce response to an economic downturn and offers immedi- bias, since the industry naturally tends to gather the in- ate citizenship to immigrant investors. Dwindling foreign formation most useful to the running of their businesses. investments and economic crisis forced the government to look for new options to raise investment capital. One thing that they understand very well is how investors respond to certain conditions. (…) So I The Canadian program initially offered residence rights to think that there is genuinely an international network immigrant investors and was introduced in response to that is sharing (…) information on how the different emerging global capital flows. The impending transition programs work. I think where there is much (…) less of sovereignty from Hong Kong to Mainland China left understanding, from a government policy perspec- many affluent businesspeople searching for a place to tive, of which of these programs are actually a good protect their wealth. With the Immigrant Investor Pro- idea, you know, are the economic benefits really gram, Canada promoted itself as a destination for this there? How would you improve them? target group. - Researcher, Migration Policy Institute, U.S. Recently, the number of countries offering global citizenship programs has increased substantially. With The information gap exists not just between policy- more than thirty years of policy experience, the lessons makers, but within the public too, which can lead to learned from these established global citizenship pro- ungrounded assumptions about the value and impact grams could be useful asset to countries that more of investor immigration programs. There is a continued recently have decided to introduce these programs. At lack of publicly available information on the number of the moment, however, very little information about these applications, supported investments, the economic developments is formally or systematically shared be- performance and broader sociopolitical impacts of these tween countries offering such programs; and this report programs. In 2014, the UK was the first country to pub- aims to help fill this gap. 1 / Most notably the Global Citizen Forum (http://www.globalcitizenforum.org) and the Global Citizenship Seminar (https://www.henleyglob- al.com/global-citizenship-seminar-2014-overview/).

6 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs lish a government-initiated report on the economic costs Secondly, although the framework discerns the relative and benefits.2 This critical report suggested that in the impact of different policy designs, it should not be seen UK at least, the economic benefits of such programs are as prescriptive. Programs operate in different national not always clear. contexts and cannot simply apply the same regulations. Rather, this should be seen as a way to identify the I suppose maybe the government was surprised strengths and weaknesses of different programs and when the MAC delivered its report, in the sense assess where there could be room for improvement. that, you know, this investor program, which kind of sounds like the right thing to have on paper, in practice is not really delivering.

- Member, Migration Advisory Committee, UK

A more systematic reflection on global citizenship programs is particularly pressing in a current context where migration flows are on the rise. In 2013, United Nations estimated the global number of international migrants at 232 million, a figure that increases every year.3 An increase in the number of high net worth individuals, including in some highly political unstable countries, pushes up the number of immigrant investors.4 More- over, more countries are introducing global citizenship programs, including potentially some outside the most advanced economies. This makes controls, benefits, and public confidence more important to guarantee.

Against this background – no formal mechanism to share policy experiences, a lack of public information, and the lack of a robust and reliable evidence-base for policy – this study compares the economic, political and social impact of different programs across the world. In so doing, an analytical framework is developed that can form the basis for more extensive comparative research. This framework can be refined according to specific needs; and may form the basis for annual reviews. Interviews with key stakeholders in a number of case studies indicate to what extent the framework reflects the experiences of governments, government partners, consultants and investors in the Immigrant Investor industry. The cases have been selected to include both longer-established and relatively new programs and to represent a geographical range; Canada, USA, UK, Bul- garia, New Zealand, Saint Kitts and Nevis and Antigua and Barbuda; while the interviewees have been selected to reflect the perspectives of the full range of stakeholders.

Two immediate reservations should be taken into account. First, these assessments depend to a large extent on governments’ willingness and ability to share data on their program outcomes. Since such data frequently are missing, not all cases can be assessed to the same detail or with the same rigor.

2 / Migration Advisory Committee (MAC) (2014). Tier 1 (Investor) Route: Investment Thresholds and Economic Benefits. Online: https:// www.gov.uk/government/uploads/system/uploads/attachment_data/ file/285220/Tier1investmentRoute.pdf. Retrieved: 01/09/2014. 3 / United Nations (2013), Population Facts. Online: http://esa.un.org/ unmigration/documents/The_number_of_international_migrants.pdf. Retrieved: 10/09/2014. 4 / Wealth-X and Arton Capital, A Shrinking World: Global Citizenship for UHNW Individuals. Online: http://www.artoncapital.com/documents/publications/Arton-Capital-Wealth-X-Report-web.pdf. Re- trieved: 01/09/2014.

7 Definition, scale and scope

Global citizenship programs can be quite similar to other Table 1. Citizenship by investment programs migration channels – and are often included in wider Existing migration contexts, for example on labor migration. Country Program referred to as Global citizenship programs are particularly often as- since Antigua and Citizenship by Investment Program 2012 sociated with Immigrant Entrepreneur Programs. Many Barbuda government programs group these together in a single Cyprus Scheme for Naturalization of Investors 2011 business migration stream.1 Dominica Economic Citizenship Program 1993

The distinguishing characteristic of global citizenship pro- Grenada Citizenship by Investment Program 2013 grams is that the immigrant investor is not required to be Saint Kitts Citizenship by Investment 1984 actively involved in the day-to-day management of the and Nevis business or of the project in which they invested. Thus, whereas entrepreneur programs tend to select candi- Table 2. Immigrant investor programs dates based on their human capital,2 high net worth Existing is decisive for one to be eligible for global citizenship Country Program referred to as programs. As a consequence, these programs attract since Business Innovation and Investment applicants with different socio-economic characteristics Australia Program –Investor stream / Signiﬁcant 2012 and motivations and thus face very different challenges Investor Stream Investor Program for Residence and and opportunities. Bulgaria 2009 Citizenship To further refine the definition, within the category of Canada* Immigrant Investor Program 1986 global citizenship programs, there are in turn two quite Canada Immigrant Investor Program 1986 different categories; programs that offer immediate citi- (Quebec) zenship and those that initially offer residency. At the mo- Greece Golden Visa Program 2013 ment, there are five Citizenship by Investment Programs in the world. Four are concentrated in the Caribbean; the Hong Kong Capital Investment Entrant Scheme 2003 fifth is the Citizenship by Investment Program in Cyprus. Hungary Residency Bond Program 2012

The remaining programs initially offer immigrant investors Ireland Immigrant Investor Program 2012 a residence permit. Subsequently to qualify for citizenship, they need to develop sociocultural ties to the coun- Latvia Immigrant Investor Visa 2013 try, typically by spending time in the country and learning Malta Individual Investor Program 2014 its culture, history or language. New Business Migration – Investor / Investor 1999 Zealand Plus Category The term Immigrant Investor Program is sometimes used to refer to this latter category of programs exclusively Portugal Golden Visa Program 2012 and as apart from Citizenship by Investment Programs. Singapore Global Investor Program 2009 For this reason, this study uses the term global citizenship programs to refer to both categories. Programs Spain Golden Visa Program 2013 United that initially offer residency are referred to as Immigrant Tier-1 (Investor) Route 1994 Investor Programs. Kingdom United Immigrant Investor Program EB-5 1990 States 1 / For example, in the Canadian Business Class Program and the Australian Business Innovation and Investment Program. * This program has been closed since the beginning of 2014 2 / See for details on selection of immigrant entrepreneurs: Sumption, M. (2012), Visas for Entrepreneurs: How Countries are Seeking Out Immigrant Job Creators. Migration Policy Institute. Online: http://migrationinformation.org/Feature/print.cfm?ID=896.

8 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Few of the programs in either category publish data on Table 3. Numbers of investors in each program the number of investor visas that are obtained per year. Some governments do not publish any immigration data Total number Immigrant including family at all. Others publish immigration statistics, but not to the investors members level of detail needed to determine the exact number of applicants to the Immigrant Investor category. Australia, Antigua and Barbuda 501 125 for example, publishes details on the total number of Australia 4812 1,203 applicants to the Business, Innovation and Investment Bulgaria 913 228 Program, but does not specify what share of these are Canada 2,3594 8,393 investors versus immigrant entrepreneurs. Canada (Quebec) 2,1385 7,565 To try to gain a grasp on the size of these immigration Cyprus n/a channels, Table 3 collates the number of approved Dominica n/a immigrant investors to each national program in 2013. Greece n/a The total number then includes both these immigrant Grenada 50 125 investors and the qualifying family members included in Hong Kong 883 2,2076 Table 1. Citizenship by investment programs the application. Hungary 4307 1,075 Due to the lack of data, a fair share of these numbers Ireland 178 38 is estimated. Estimations are based on data from the Latvia n/a industry, secondary publications, interviews and estima- Malta 1869 465 tions by the author. The estimated numbers are shown New Zealand 13510 438 in italics. Portugal 24711 618 Where information on the total number of family mem- Saint Kitts and Nevis 60012 1,500 bers was missing, the number of investors has been Singapore 29813 746 multiplied with a factor of 2.5 persons per application. Spain 12314 308 This is a conservative estimate, since both anecdotal United Kingdom 56015 1,590 Table 2. Immigrant investor programs evidence and the programs that do publish statistics United States 1,86716 5,677 indicate that the number of persons per application is often higher. 1. Based on interview with key stakeholders. Expectations are that about ten applications will be approved per month in the first year, adding up to a By far, the largest number of applications went to the projection of 120 immigrant investors. Canadian program, followed by the Unites States. To- 2. Based on the number of immigrants under the Business Innovation and Investment Program and the number of significant investors. Consultants at gether, these programs seem to have generated about Deloitte expect a total of 700 visas per year in the future. half of the applications in 2013. The European programs 3. Based on industry trends. 4.1 Base d on interviCICew with key s(2012)takeholders. Expec taPreliminarytions are that about ten applicati oTablesns will be approved p–er m oPermanentnth in the ﬁrst year, adding up to aand projection otemporaryf 120 immigrant investors. residents, 2013:

together represent about a fifth. Another ten per cent is 2 Based on the nuCanadamber of immigrants und e-r t hePermanent Business Innovation and Investm eresidentsnt Program and the numbe r byof signi ﬁccategory,ant investosr. Consultants a t D2009-2013.eloitte expect a total of 700 visas p erOnline: year in the future. http:// www.cic.gc.ca/english/resources/statistics/facts2013-preliminary/01.asp. attributed to a number of Caribbean programs. However, 3 Based on industry trends. Retrieved: 12/09/2014. since these Caribbean states are particularly careful with 5.4 CIC (2012) PrelimMinistryinary Tables – Perman enoft and teImmigrationmporary residents, 2013: Canada - Pandermanent r esCulturalidents by category, 200 9Communities-2013. Online: http://www.cic.gc.ca/eng liQuebec.sh/resources/statistics/facts2013-preliminary/01.asp. Retrieved: 12/09/2014.

the publication of numbers of applications, the reliability 6.5 Min istry of ImmImmigrationigration and Cultural Communities Q uDepartment,ebec. Hong Kong (2014), Statistics on the Capital Investment Entrant Scheme. Online: http://www.immd.gov.hk/en/services/ of data for this category is limited. The distribution of 6 Immigration Department, Hong Kong (2014), Statistics on the Capital Investment Entrant Scheme. Online:h ttp://www.immd.gov.hk/en/services/hk-visas/capital-investment-entrant/statistic.html. Retrieved: 01/09/2014. hk-visas/capital-investment-entrant/statistic.html. Retrieved: 01/09/2014. immigrant investors is illustrated with Figure 1. 7.7 Disc us Holdings Discus(2014), The popular HunHoldingsgarian Residency Bond P ro(2014),gram and the Golde n TheVisas. Onlin e:popular http://www.discushol diHungarianngs.com/popular-hungarian-res idResidencyency-bond-programme-golden -vBondisas/. Program

8 Phelan, S. (2014and). State's ca shthe-for-visas scGoldenheme fails to attract g loVisas.bal investors. On linOnline:e: http://www.indep enhttp://www.discusholdings.com/popular-hundent.ie/irish-news/states-cashforvisas-scheme-fails-to-attract-global-investors-29893466.html. Retrieved: 01/09/2014. - garian-residency-bond-programme-golden-visas/. Figure 1. Division of applications over different regions 9Based on interview with key stakeholder, projection of 90 applications in four months. 8. Phelan, S. (2014). State’s cash-for-visas scheme fails to attract global 10 Source: Immigrinvestors.ation Department New Zeala ndOnline:. http://www.independent.ie/irish-news/states-cashfor-

11 Spanish Propertvisas-scheme-fails-to-attract-global-investors-29893466.html.y Insight (2014), Spain’s ‘Golden Visa’ Program Oﬀ to Slow Start. Online: http://www.spanishpropertyinsight.com/2014/05/19/spains-golden-visa-program-slow-start/. Retrieved: 01/09/2 0Retrieved:14.

12 Information fro01/09/2014.m key stakeholders. 9. Based on interview with key stakeholder, projection of 90 applications in four Other 13 Based on Hurunmonths. survey on immigration preferences of HNW Chinese: Hurun Research Institute (2014), Immigration and the Chinese HNWI 2014. Online: http://www.hurun.net/en/ArticleShow.aspx?nid=1502. Retrieved: 01/09/2014.

10.14 Spanish PropertSource:y Insight (2014), Spain’ s ‘ImmigrationGolden Visa’ Program Oﬀ to Slow S taDepartmentrt. Online: http://www.spanishprop erNewtyinsight.com /20Zealand.14/05/19/spains-golden -visa-program-slow-start/. Retrieved: 01/09/2014.

11.15 Migrati on AdvisSpanishory Committee (MAC) (20 Property14). Tier 1 (Investor) Rout e:Insight Investment Thresh ol(2014),ds and Economic Ben eSpain’sﬁts. Online: https://www ‘Golden.gov.uk/government/u plVisa’oads/system/up Programloads/attachment_data/ﬁl eOff/285220/ Ttoier1inv eSlowstmentRoute.pdf . Retrieved: 01/09/2014. Start. Online: http://www.spanishpropertyinsight.com/2014/05/19/spains- 16 Source: USCIS sgolden-visa-program-slow-start/.tatistics. Retrieved: 01/09/2014. 12. Information from key stakeholders. 13. Based on Hurun survey on immigration preferences of HNW Chinese: Hurun Research Institute (2014), Immigration and the Chinese HNWI 2014. Online: http://www.hurun.net/en/ArticleShow.aspx?nid=1502. Retrieved: Caribbean 01/09/2014. 14. Spanish Property Insight (2014), Spain’s ‘Golden Visa’ Program Off to Slow Start. Online: http://www.spanishpropertyinsight.com/2014/05/19/spains- golden-visa-program-slow-start/. Retrieved: 01/09/2014. 15. Migration Advisory Committee (MAC) (2014). Tier 1 (Investor) Route: Investment Thresholds and Economic Benefits. Online: https://www.gov.uk/ government/uploads/system/uploads/attachment_data/file/285220/Tier1in- North vestmentRoute.pdf. Retrieved: 01/09/2014. Europe America 16. Source: USCIS statistics.

9 Trends and developments

Supply Demand

About half of the currently available programs have been Global citizenship programs enable high net worth introduced since 2010. The significant increase in coun- individuals to move to popular migration destinations, tries offering such programs can largely be explained by enjoy easier travel options, move to more favorable tax three trends. jurisdictions or develop an exit strategy in case they may need to leave their home country. The latter motivation is Firstly, citizenship is no longer seen as strictly national; relevant to a large share of the high net worth population dual or even global citizenship is increasingly recog- originating from unstable political climates, where safety 1 nized. This is particularly true for a global class of highly and fair legal representation are not guaranteed. These skilled professionals that is becoming increasingly mo- motivations are seen to different extents in different bile. Demand for ways to obtain second residency and/ groups of applicants. or citizenship among this affluent, successful class is therefore increasing. The Chinese have traditionally formed the largest group of immigrant investors and today account for more than Secondly, global citizenship programs, as a response to half of the applications for many programs.4 The decision this growing supply, fit a general migration policy trend to obtain second residency is often motivated by the towards being more economically selective. There is a wish to protect wealth in an unstable political climate. growing awareness among policymakers of the econom- Furthermore, Chinese immigrant investors are often look- ic need to attract this footloose class of highly skilled in- ing for cleaner, healthier environments for their families 2 dividuals. High net worth can be seen as a proxy for the and better education for their children.5 sought-after human capital of these immigrant investors. Demand from Chinese investors may increase with the You are talking to individuals who are at the top of growing number of high net worth individuals in China. their industries, of their business, of their society, China is currently one of the three largest source coun- of their role in their own country – their success is tries of ultra-high net worth individuals and their number not only measured by their wealth, but by their net is expected to increase by 33% over the next five years worth. in China and India.6 At the same time, particularly in China, the demand is strongly influenced by government - Representative, Henley & Partners restrictions. The restriction on dual citizenship, for exam- Thirdly, these developments were additionally boosted ple, is an important inhibition on the options for Chinese 7 by the global financial crisis, which left many countries investors to use global citizenship programs. Similarly, looking for ways to spur economic development in areas regulations restricting the transfer of large sums of mon- where there have been foreign investments shortfalls.3 ey abroad are an important barrier to Chinese immigrant investors.8 Some stakeholders expect a gradual easing

1 / Ong, A. (1999), Flexible Citizenship: The Cultural Logics of Transna- 4 / For example in Canada and the U.S. tionality. Durham NC: Duke University Press. 5 / Hurun Research Institute (2014), Immigration and the Chinese HNWI 2 / Kuptsch, C. and P. Eng Fong (2006). Competing for Global Talent. 2014. Online: http://www.hurun.net/en/ArticleShow.aspx?nid=1502. Geneva: International Labor Organization. Retrieved: 01/09/2014. Shachar, A. (2006), The Race for Talent: Highly Skilled Migrants and 6 / Wealth-X and Arton Capital, A Shrinking World: Global Citizenship Competitive Immigration Regimes. Toronto: University of Toronto, for UHNW Individuals. Online: http://www.artoncapital.com/docu- Faculty of Law. ments/publications/Arton-Capital-Wealth-X-Report-web.pdf. Retrieved: 3 / Chishti, M. And C. Bergeron (2009), Recession Breathes New Life 01/09/2014. into US Immigrant Investor Visa Program. Migration Policy Insti- 7 / Hurun Research Institute (2014), Immigration and the Chinese HNWI tute. Online: http://www.migrationinformation.org/USFocus/print. 2014. Online: http://www.hurun.net/en/ArticleShow.aspx?nid=1502. cfm?ID=764. Retrieved: 01/09/2014. Sumption, M. and K. Hooper Retrieved: 01/09/2014. (2013), The Golden Visa: ‘Selling Citizenship’ to Investors. Migration 8 / Although there are also ways to circumvent these restrictions http:// Policy Institute. Online: http://www.migrationinformation.org/Feature/ www.bloomberg.com/news/2014-07-14/secret-path-revealed-for-chi- print.cfm?ID=981. Retrieved: 01/09/2014. nese-billions-overseas.html.

10 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs of these constraints, which could result in a rapid surge since a considerable group is ageing and looking for a in demand. favorable tax environment in which to arrange the inheri- tance of their net worth.12 The second largest source country for immigrant investors is Russia. Over the last couple of years, the number Competition of Russian high net worth individuals has increased, as has correspondingly the number seeking second Overall, stakeholders in the field are expecting an in- residence and/or citizenship rights by investment.9 crease in demand. At the same time there is an increas- The conflict with Ukraine could be expected to further ing supply of global citizenship programs, which means increase the number of applications from Russia. On the that an intensification of competition between these pro- other hand, political sensitivities around obtaining second grams is likely. Changes in the market are swiftly picked citizenship may form an obstacle for Russian immigrant up on and responded to. investors in the future.10 If Canada is going to restrict [its intake of immigrant Another increasingly important source for global citi- investors], then we will look to try and pick up any zenship programs is the Middle East. Again, this is a gaps that Canada leaves, so we watch each other function of the increasing number of high net worth very carefully. individuals in this region.11 Additionally, it is also a direct consequence of the increasing number of countries in - Researcher, Massey University, New Zealand turmoil. For high net worth individuals in these areas, global citizenship programs can provide a safety net. Competition does not take place across the entire spectrum of global citizenship programs. Rather, the market In all these countries the rich are making a lot of is made up of different regions, types of programs and money. So do they have any guarantees that they countries with different reputations for their business are going to keep their money? No. Do they have climate and quality of life. any guarantees that if ever they were incriminated with any offence, they will have the best legal system If you are looking at competition, it would be more at their disposal? No. Could they be arrested without relevant to look at competition between programs any motives? Yes. Can they be quickly executed that are offering a similar thing. So, like, the Caribbe- after being sentenced? Yes. So, if you had billions, an programs basically are all offering the same thing. to spend a couple of hundred thousand dollars, you (…) As a result, you might see price competition. know, to get citizenship – hey, why not? But those programs, the Caribbean, you know, Saint Kitts and Nevis is not competing with the UK. They - Immigration lawyer, Dubai are offering a fundamentally different thing.

Furthermore, particularly for high net worth individuals - Researcher, Migration Policy Institute, U.S. from the Middle East, these programs have the direct benefit of providing easier travel options. Popular migration destinations thus attract a higher number of immigrant investors planning to relocate their The main reason [I wanted to obtain second citizen- lives and families. When these immigrant investors set ship] (…) is to facilitate the possibilities of investing their mind on a particular destination, this is for quality of and working in Europe. With my present citizenship life reasons and will not easily be affected by an increas- this can be very complicated. So I am seeking a ing number of options. However, for immigrant investors citizenship that will allow me better possibilities in the looking for more ease of travel, an exit strategy or tax EU region. planning options, competition can be a tangible pressure. - Immigrant investor who has obtained permanent residency in Bulgaria There is definitely a risk of undercutting and there is a risk of, you know, everybody chasing the low- Another growing group of immigrant investors comes est common denominator and the value of these from the USA. Tax planning is an important motivation programs being brought down so that countries can for American high net worth individuals. This is another compete against each other. group for whom demand is foreseen to increase further, - Immigration lawyer, Fragomen, UK 9 / Wealth-X and Arton Capital, A Shrinking World: Global Citizenship for UHNW Individuals. Online: http://www.artoncapital.com/docu- All of the above make this an opportune moment for ments/publications/Arton-Capital-Wealth-X-Report-web.pdf. Retrieved: countries to start an international discussion on stan- 01/09/2014. 10 / Vityazeva, A., (2014), Hiding Dual Citizenship Now a Criminal dards and best practices that should be respected in the Offense in Russia. Russia Beyond the Headlines. Online: http://rbth. face of the increasing competition. The analytical frame- com/society/2014/08/12/hiding_dual_citizenship_now_a_criminal_of- work proposed by this study will help to identify opportu- fense_in_russia_38929.html. Retrieved: 01/09/2014. nities and risks for different programs. 11 / Wealth-X and Arton Capital, A Shrinking World: Global Citizenship for UHNW Individuals. Online: http://www.artoncapital.com/documents/publications/Arton-Capital-Wealth-X-Report-web.pdf. Retrieved: 01/09/2014. 12 / Idem.

11 Methods The analytical framework developed below is based of case study countries. These issues are outlined in the on secondary literature and interviews with key stake- separate case assessments at the end of this report. The holders. Twenty-eight interviews have been conducted case assessments provide an indication of the limitations with government representatives; government partners; of the analytical framework. In highly different contexts, consultants and investors. not all relevant issues can be reflected in the same quantified assessment tool. The case studies provide a The interviewed government representatives were in- glimpse on other issues that could be relevant in these volved in either the policy or the implementation side of different programs. active global citizenship programs. Government partners were agencies that advise governments on the design Case selection of their programs. Consultants included immigration lawyers who often represent investors and assist them Seven cases have been selected: Canada, the U.S., the with their application, as well as respondents from due UK, New Zealand, Bulgaria, Saint Kitts and Nevis and diligence agencies working with immigrant investors. Antigua and Barbuda. This selection is based on differ- Were this pilot study to be extended in the future, there ent criteria. may also be value in interviewing other stakeholders. It would be useful, for example, to explore cases of pro- The first is geographical range: two cases each have grams that have been cancelled, such as the previous been selected in the three main global regions where Irish program, or the one in Montenegro. Furthermore, it global citizenship programs are offered – North America, would be interesting to interview representatives from the Europe and the Caribbean. The North American cases political opposition. Most importantly, a useful addition to are Canada and the U.S., the European cases are the the literature would be to conduct a quantitative study. UK and Bulgaria, and the Caribbean cases are Saint There is a particular lack of information with regard to Kitts and Nevis and Antigua and Barbuda. New Zealand the behavior of immigrant investors, which cannot be is the only case study outside the main global areas filled with stakeholder interviews or a small number of offering global citizenship programs. in-depth interviews. Secondly, the cases have been selected to include The interview probed the potential impact of global both longer established and newer programs. The citizenship programs; a topic on which there is very little longest-running programs considered for this study are consensus in the small, but growing body of literature on Saint Kitts and Nevis and Canada, both introduced in the these programs. To leave room for unanticipated impacts 1980s. The US, UK and New Zealand programs were and outcomes, more directed questions were comple- introduced in the 1990s. The remaining case studies of mented with open-ended questions on best practices, Antigua and Barbuda and Bulgaria have been introduced challenges and impacts. The most commonly shared relatively recently, respectively in 2013 and 2009. best practices and impacts have been implemented in the analytical framework. Thirdly, the case studies represent a range in program types. Saint Kitts and Nevis and Antigua and Barbuda While it is primarily driven by the responses from stake- are both Citizenship by Investment Programs. Bulgaria holders, the framework focuses on indicators that are initially offered an Immigrant Investor Program, but apart reasonably accessible for independent assessment. from the regular citizenship application process recently For example, several stakeholders mentioned that it is also introduced a fast-tracked path to naturalization, of vital importance to ensure that you are working with again through residency. The Canadian, the U.S. and the reliable partners, particularly in the due diligence pro- New Zealand programs represent the other end of the cess. Although this aspect has been emphasized as key spectrum, as programs that offer only a residency permit to having a reputable program, assessing this would to investors, who then face the same requirements to require in-depth research. With regard to this example, obtain citizenship as those in any other immigrant cate- assessment is therefore based on whether information gory. on these partners is publicly available rather than whether the actual partners are reliable. Although the resulting Table 4. Case selection framework is therefore not exhaustive, it is designed to Global region provide a broad overview of the impacts of different poli- North cy designs, which is open for updates or further use. Caribbean Europe Other America

Still, some of the information that is selected for in the St Kitts and tion Canada c Before 1990 framework is not made available by all global citizenship u Nevis * d o

t r programs. Indeed more openness on the program de- 1990 – 2000 US UK New Zealand i n

sign and outcomes is the overarching recommendation o f

e Antigua and After 2000 Bulgaria of this report. i m Barbuda* T Apart from identifying themes and potential impacts to * Citizenship by Investment Programs create the framework, the interviews with key stakeholders were used to assess the impacts of a small number

12 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Towards an analytical framework

Global citizenship programs operate in very different may even have political ramifications. In the past, several contexts and therefore generate different opportunities governments, such as Montenegro and Ireland, have and challenges. There is no single best practice that decided to stop their global citizenship programs as a could apply to each and every program. This analytical consequence of fraud or political sensitivity of individual framework aims to identify in which area the different investors.4 programs face the biggest risks or room for improvement. The focus is on three particular concerns for all In the worst case, controversial admissions under global global citizenship programs. citizenship programs have been known to result in visa restrictions from the international community.5 In 2002, First, residency and citizenship are valuable goods.1 for example, the U.S. took a relatively negative stance Governments that offer residency and/or citizenship to towards one of the Citizenship by Investment Programs immigrants who make an economic contribution to the in the Caribbean. country, should clearly ensure that they are maximizing the economic benefits that flow from such contribution. Countries that have tried to broaden their offshore financial sectors without implementing effective regu- Second, in order to maintain public acceptability, this lation and oversight have been especially vulnerable process should not be a matter of a simple transaction.2 to money laundering and other financial crimes. (…) Global citizenship programs are a sensitive topic in Dominica, Grenada, and Saint Kitts and Nevis have immigration policy. Each country feels the risk of being poorly regulated economic citizenship programs. (…) accused of ‘selling visas’, a misconception that forms a Unscrupulous individuals, including suspected crim- powerful critique of global citizenship policies.3 inal organization members, have taken advantage of these programs to ease travel and to modify and/or Third, the standards of selecting and accepting im- create multiple identities. Such individuals have also migrant investors should be designed to preserve the used these false identities to help create the offshore program’s legitimacy. Of course, all immigration pro- entities used in money laundering, financial fraud, grams target persons of good character and face the migrant smuggling, and other illicit activities, as well challenge of filtering out individuals who could be a risk as to facilitate the travel of the perpetrators of these to the country and its international reputation. This is a crimes.6 particular risk for global citizenship programs because the high net worth population that these programs target The extent to which programs are designed to maximize is often a publicly exposed group. This generates a economic benefits, preserve public acceptability and somewhat higher risk for scandals, which in the extreme maintain legitimacy is assessed in this paper in a framework consisting of five axes: 1 / Collet, E. (2014), Valuing Citizenship: A Commodity or an Identity? Migration Policy Institute. Online: http://www.migrationpolicy.org/news/ • Investment requirements – regarding the investment valuing-citizenship-commodity-or-identity. Retrieved: 01/09/2014. sum, maturity and types of allowed investments. 2 / Dzankic, J. (2012) Many Countries in the European Union Al- low Individuals to Purchase Citizenship: Such ‘Investor Citizenship’ • Commitment requirements – concerning residential Is Unfair and Discriminatory. Online: http:/blogs.lse.ac.uk/europ- pblog/2012/05/08/citizenship-for-sale. Retrieved: 01/09/2014. John- ston, L.M. (2013) A Passport at Any Price? Citizenship by Investment 4 / Brinker, T.M. & A. Dalson (2008) Obtaining Economic Citizenship in through the Prism of Institutional Corruption. Edmond J. Safra Working the Caribbean: Can ‘Home’ Be Bought? Journal of Practical Estate Papers, No. 22. Online: http://ssrm.com/abstract=2324101. Retrieved: Planning, April-May, pp. 21–24. 01/09/2014. Collet, E. (2014), Valuing Citizenship: A Commodity or Dzankic, J. (2010) Transformations of Citizenship in Montenegro: A an Identity? Migration Policy Institute. Online:http://www.migrationpol- Context-Generated Evolution of Citizenship Policies. Citsee Working icy.org/news/valuing-citizenship-commodity-or-identity. Retrieved: Paper Series. Online: http://www.citsee.ed.ac.uk/working_papers. 01/09/2014. Retrieved: 01/09/2014. 3 / Dzankic, J. (2012) Many Countries in the European Union Al- 5 / For example in Dominica and Grenada: low Individuals to Purchase Citizenship: Such ‘Investor Citizenship’ 6 / International Narcotics Control Strategy Report (2002), The Carib- Is Unfair and Discriminatory. Online: http:/blogs.lse.ac.uk/europ- bean. Online: http://www.state.gov/documents/organization/8697.pdf, pblog/2012/05/08/citizenship-for-sale. Retrieved: 01/09/2014. retrieved: 01/09/2014. Page: VI-22.

13 and cultural ties to the country the Immigrant Inves- Finally, whether the investor has different options for the tor is required to develop to be eligible for citizen- investment is an important criterion for public acceptabil- ship. ity of the program. A single option for investment makes the acquisition of residence and/or citizenship rights • Transparency – regarding political communication of more like a transaction and therefore more vulnerable to the program, its process and outcomes. the critique of ‘selling passports’. One critic of the Mal- tese Immigrant Investor Program, for example, argued • Economic weight – the economic contribution of the that: ‘In contrast to other EU member states, Malta does investments in the national economic context. not require investment or the establishment of a compa- 7 • Social capacity – the social significance of the pro- ny to receive the document’. gram within the national context. Price point Each axis adds up to a score between zero and ten, in which the approaches known to maximize economic The minimum required investment is highly sensitive to benefits, legitimacy and public acceptability score the competition and determined with a close eye on what highest. Figure 2 broadly shows how they are related to other programs are offering in terms of trajectory to citi- 8 the three main areas of concern. zenship, quality of life and travel options.

Figure 2. Impacts and indicators Not only does the investment amount directly determine the amount of money that flows into the country under the global citizenship program, it is also decisive for the Maximize economic Public acceptability Legitimacy beneﬁts minimum net worth of applicants that can apply. While inter-country competition takes place within different Investment requirements Transparency brackets of countries with a similar quality of life and travel access offer, this aspect of the investment amount

Commitment requirements is much more similar across the globe. This is why this study – which is designed to assess impacts rather than consider competitiveness – assigns scores to programs Economic weight Social capacity based on the global average. In a sense, all programs face a similar challenge in this regard:

Investment requirements If you do anything to set high barriers, then you risk scaring off people that you want. If you set very low This axis evaluates the requirements with regard to: barriers, then you risk attracting the people who, you • Price point know, not actually bring very much benefit at all.

• Maturity - Policy manager, Immigration New Zealand

• Choice of investment type IIn the past, global citizenship programs have been hes- itant to review the required amount. Although Canada • Job creation doubled the minimum investment sum from CA$400,000 to CA$800,000 in 2010, the financing option has The minimum amount, maturity and job creation deter- ensured that the program did not become much more mine the economic impact of the different programs. demanding for immigrant investors. The UK is currently Obviously, the types of investments that are supported reviewing the investment sum of its Tier 1 investor route, as part of the program – whether these are government which up to now remained unchanged since the pro- bonds, real estate projects, shares in businesses – are gram’s introduction.9 also decisive for the economic outcomes. However, this study does not provide specific recommendations for the most beneficial types of investment, since this is highly dependent on the macroeconomic context.

You cannot compare government bonds with government bonds. It really depends a lot on the country, on the quality and so on. The same with real estate. (…) Each country has a different overall framework of what makes sense or not. 7 / EurActiv (2014) MEPs to Slam Malta’s Plan for EU Passports. Online: http://www.euractiv.com/justice/meps-slam-maltas-plan-eu-passpor- - Representative, Henley & Partners news-532756. Retrieved: 01/09/2014. 8 / See the Arton Index for a systematic overview of the competitive attributes of different programs 9 / Migration Advisory Committee (MAC) (2014). Tier 1 (Investor) Route: Investment Thresholds and Economic Benefits. Online: https:// www.gov.uk/government/uploads/system/uploads/attachment_data/ file/285220/Tier1investmentRoute.pdf. Retrieved: 01/09/2014.

14 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Box 1. Investment amount scores or offer a wider array of investment options. Examples of this would be Portugal, which directs all investments Both the size of investments flowing into the country and towards real estate. Other program categories, most the high net worth of the applicants are important factors notably the UK and New Zealand, leave the choice for in assessing the economic impact. Therefore, this item investment types completely up to the market, with very determines half of the investment requirements axis. few restrictions on the type of developments that can be supported. The score for each individual program is based on the mean and calculated as a proportion of this outcome, The standpoint of this study is that providing only a sin- with a maximum of two times the mean. To standardize gle option can be detrimental to the public acceptability this score to a number between zero and five, the pro- of the program, since it makes the process of acquiring portion is multiplied by a factor of 2.5. In this way, price residency and/or citizenship more like a transaction. points of the exact average score 2.5 points and those Having several options requires immigrant investors to of two times the average or more score five. study investment options more closely and make a personal investment choice. = 2.5, = 5 Giving the market the freedom to choose the invest- 𝑦𝑦𝑦𝑦𝑖𝑖𝑖𝑖 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 ∗ 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚 ments, however, can have at least two adverse effects. Maturity 𝑦𝑦𝑦𝑦� The first is that this policy can increase risks of misuse and abuse since it introduces a new range of actors into The maturity of the investment indicates how long the the process. For the Canadian program, this became a net investment is required to remain in place. Five years reason to revise the program in 2010. seems to be the standard, which the majority of programs have adhered to. Notable exceptions are the What we see as the main motivation for these Greek and Spanish programs, which allow renewal of the investors is not to necessarily make an investment residence permit only as long as the immigrant investor that they are going to make a lot of money back on. maintains the investment property.10 What they are looking for is the permanent residency attached to the investment. And that comes with a Some programs have introduced fast-track options, great deal of incentives for people to try to set up which require a higher investment sum with a shorter not necessarily truthful schemes to get their perma- maturity period. These options are not specifically taken nent residency. into account in this scale, because the foremost objective is to create a cross-country comparison. - Representative from Citizenship and Immigration Canada Box 2. Investment maturity scores The second potential drawback is that the market does The maturity of the investments is an important indica- not necessarily allocate the investments to the most ben- tion of the economic benefits, but of less importance eficial projects. Immigrant investors seem very cautious than the investment sum. Therefore, it determines the with their investments and choose the most conservative score on the investment requirement axis for 3 points. approach, which often means that they invest in government bonds. The score for each individual program is based on the standard of five years. To standardize the number of The reason that we chose bonds was just that, you years to a number between zero and five, it is multiplied know, we felt that bonds would be able to be liqui- by a factor of .6. In this way, five-year maturity results in dated easily, we hoped that they would be less vola- a score of 3 and all quicker procedures score lower. tile than potentially the stock market. (…) [Normally,] I do not invest in bonds, I would not have gone that = .6, = 3 route on my investments, but I did not have the time to actually define and decide what investments are 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑦𝑦𝑦𝑦 ∗ 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚 appropriate for us. Choice of investment type - Immigrant Investor who migrated to New Zealand

This third aspect of the “Investment requirements” axis This tendency caused most of the criticism on the indicates whether the applicant has a personal choice economic benefits of the UK program.11 Particularly in in the selection of an investment. Programs vary widely such a large economy with a well-functioning market in around this issue. Some cases, ranging from Canada government bonds, the additional benefit of immigrant to Dominica, Hungary and Malta, direct all investments investors is questionable. to a single option. Others specify types of investments, for example in real estate, but then leave the choice for an actual site or project open to the immigrant investor, 11 / Migration Advisory Committee (MAC) (2014). Tier 1 (Investor) Route: Investment Thresholds and Economic Benefits. Online: https:// 10 /See for more information Bayat Migration Services. Greece. Online: www.gov.uk/government/uploads/system/uploads/attachment_data/ http://ilsgroup.com/greek.html. Retrieved: 12/09/2014. file/285220/Tier1investmentRoute.pdf. Retrieved: 01/09/2014.

15 What makes this a particularly relevant issue in the UK, clearer directions to the investments. Particularly in coun- for example, is that the current regulations require in- tries such as the Caribbean states, where the citizenship vestors to ‘top up’ their investment in case it loses value program is an important part of the economic develop- over time. This actually serves as a disincentive to invest ment strategy, it might make more sense to have stricter in more risky projects and businesses. government intervention to channel investments to the most profitable projects and businesses. On the other hand, policy representatives in New Zealand consider this to be less problematic and raise concerns that the riskier the initial investment is for the investor, the less likely this individual will be to pursue Box 3. Choice of investment type more investments in New Zealand after obtaining resi- The decision whether to leave the investment choice to dency and/or citizenship there. market forces or to govern it more strictly largely de- Definitely, the more risky investments might have a pends on the context. Therefore, no best practices are better long-term pay-off to New Zealand in the long identified around this area. For this reason, this require- run. But if you are looking at trying to keep these ment receives less weight in the investment requirements people here and making sure they get what they scale and differentiates only between programs that offer want, then we might get that more active investment a single investment option and programs that offer more later. alternatives.

- Policy advisor, Immigration New Zealand Programs that allow different options score one point on the investment scale. We would never say to people that they have to do active investments. The most that we would do is to discount the money that needs to be invested in order to meet the requirements, because otherwise Job creation it puts the government in a very difficult position Investments in real estate projects or businesses may as people get ripped off or even the value of their result in job creation, thus demonstrating clear econom- investments drop for quite legitimate reasons. ic benefits and providing governments with a strong - Policy manager, Immigration New Zealand argument in favor of the global citizenship program to support public acceptability. In spite of that, the U.S. is In many cases, however, evidence suggests that, for the currently the only program explicitly requiring direct job overwhelming majority of investors, the investment made creation from all investors in the group of the non-entre- to meet the criteria of the global citizenship program preneurial immigrant investor programs. will be the only one they will make in the country.12 To mitigate such effects, the recommendation would be to allow for targeting of the funds towards riskier invest- Box 4. Job creation ments with greater direct economic benefits. Another point is allocated to programs that require job The U.S. seems to have found a middle way. Invest- creation. ments in the most cautious option of government bonds are restricted by a job creation requirement. In this case too, however, stakeholders emphasize that the government should be careful not to risk being held responsible for failing investments.

I do think that investments fail and succeed every day and it is very, very difficult – as we know – to predict the success or failure of investments, so having a government too intertwined with promoting certain investment types that could potentially fail, it could really not only hurt their ability to market their immigrant investor program, but it other ripple effects.

- Representative, IIUSA, industry trade association for the EB-5 Regional Center Program

While this model may work for the U.S., however, some economies could benefit more by giving somewhat

12 / Ley, D. (2003), Seeking Homo Economicus: The Canadian State and the Strange Story of the Business Immigration Program. Annals of the Association of American Geographers, Vol. 93(2), pp. 426-441.

16 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Overview: investment requirements The scores on the investment requirement axis follow this pattern, but with some notable exceptions. The In terms of minimum investment amounts, programs Canadian program stands out as a program in a popular cluster around the averages of the ‘bracket’ of compa- migrant-receiving country that scores relatively low on rable countries. The English speaking and most popular the investment requirement scale. This program’s price immigrant-receiving countries settle their price points point is below the average of comparable migrant-re- around a million US dollars. For the Caribbean countries, ceiving countries and directs all investments towards a the mark seems to be around US$200,000. The remain- single government fund. ing European programs choose price points in between those categories, with Greece, Hungary and Latvia at the The Maltese program also seems to score relatively low. lower end of the spectrum and Cyprus and Portugal at Malta requires investors to pay a contribution amount, the higher end. Table 5 provides information about the which makes it a relatively costly program. However, assessed global citizenship programs where the individ- since the framework discourages the use of only a single ual score of each of the four indicators under this axis is investment option for political reasons, the investment indicated in the header of the table. requirements are evaluated as relatively low in this context. Generally speaking, popular migrant-receiving countries compete on aspects of business climate and quality of The result for each of the discussed global citizenship life rather than price point. Therefore, they are able to programs is illustrated with Figure 3. charge a higher price for their global citizenship program.

Figure 3. Investment requirements score

17 Table 5. Investment requirements

Investment More than a Job creation Minimum In US$ maturity single option requirement investment 5 points 3 points 1 point 1 point Antigua and US$ 250,000 250,000 5 Yes No Barbuda

Australia AU$ 1,500,000 1,400,000 4 Yes No

Bulgaria BGN 1,000,000 700,000 5 Yes No

Canada CA$ 800,000 750,000 5 No No

Cyprus € 2,500,000 3,400,000 3 No No

Dominica US$ 100,000 100,000 n/a No No

Greece € 250,000 330,000 n/a Yes No

Grenada US$ 250,000 250,000 5 No No

Hong Kong HK$ 10,000,000 1,290,000 7 Yes No

Hungary € 250,000 350,000 5 No No

Ireland € 1,000,000 1,350,000 5 Yes No

Latvia € 250,000 330,000 5 Yes No

Malta € 650,000 900,000 n/a No No

New Zealand NZ$ 1,500,000 1,300,000 4 Yes No

Portugal € 500,000 700,000 5 Yes No

Singapore US$ 250,000 250,000 5 Yes No

Spain € 500,000 660,000 n/a Yes No

St Kitts and S$ 250,000 250,000 5 Yes No Nevis United Kingdom £ 1,000,000 1,700,000 5 Yes No

United States US$ 500,000 500,000 5 Yes Yes

18 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Commitment requirements Box 5. Program type

Commitment requirements refer to the ways immigrant This score aims to allow for differentiation within the investors need to engage with the country before obtain- categories and also to ensure that all Immigrant Investor ing citizenship. Indications of commitment form the basis Programs score higher than the Citizenship by Invest- of naturalization processes and usually include ways to ment Programs. ensure a link with the country through residence, knowledge of the country and its culture.1 Residence by Investment Programs therefore score five points. Program type

By definition, Citizenship by Investment Programs require much less commitment to the country than Immigrant Citizenship by Investment Programs and Immigrant Investor Programs. Therefore, they face a higher risk of Investor Programs face very different opportunities in this being criticized as programs that sell passports.2 regard and are therefore assessed by different criteria.

The biggest challenge the policymakers face is the For Citizenship by Investment Programs, indicators of kind of discomfort with the idea of selling citizen- commitment requirements are: ship. And obviously, as you know, most countries • Whether the application process requires the immi- are not selling citizenship, they are providing a route grant investor to be physically present in the country; that will eventually lead to citizenship, but that starts as something – that starts with just the residence • Whether there are any physical presence require- program. (…) I look at this from a normative point of ments as a condition of renewal of the passport; view and I think that it is undoubtedly the programs that have a residence requirement and do not lead • Whether the application process requires an inter- to immediate citizenship are much easier to sell to view or an oath. the public than the ones that do not. For Immigrant Investor Programs, the indicators of com- - Researcher, Migration Policy Institute, USA mitment try to establish to what extent applicants are treated the same as other immigrant categories in the In a competitive context, having a more demanding process of obtaining citizenship. This is not necessarily process of commitment to the country is not a feasible the end goal for all immigrant investors. However, the ac- option for all programs. For the currently existing Citizen- quisition of citizenship is the most controversial aspect of ship by Investment Programs, more demanding process- global citizenship programs.4 Indicators in the Immigrant es of commitment would be likely to trump demand and Investor Programs segment include: therefore defeat the economic purpose of the program in the first place. That being said, the present study does • To what extent the residency requirements to obtain not aim to demonstrate the most competitive policy citizenship are similar to those for other immigrant design, but to identify impacts. Looking at public ac- categories; ceptability, this impact is likely to be much higher when it concerns programs that offer immediate access to • To what extent the physical presence requirements citizenship.3 for immigrant investors are similar to those for other immigrant categories; 1/Held, D. (1991), Between State and Civil Society: Citizenship. In. G. Andrews (ed.) Citizenship. London: Lawrence and Wishart. • Whether the immigrant investor is required to pass a 2/Dzankic, J. (2012) Many Countries in the European Union Allow language or citizenship test before being eligible for Individuals to Purchase Citizenship: Such ‘Investor Citizenship’ Is Unfair and Discriminatory. Online: http:/blogs.lse.ac.uk/europ- citizenship. blog/2012/05/08/citizenship-for-sale. Retrieved: 01/09/2014.

19 These criteria form a strong argument against the criti- It would certainly ensure that the applicant at least at cism that global citizenship programs are selling pass- minimum knows what Antigua is. (…) The applicant ports. They are therefore crucial in maintaining public would be required to travel to Antigua, and in so acceptability. doing the hope is that you will boost your tourism numbers, that there would be spin-offs from the These requirements can also advance economic ben- attraction of investors into Antigua. (…) They will efits. Global citizenship programs do not require appli- first buy a ticket, they would have to pay taxes on cants to actually move their business to the receiving the ticket, they would have to come and they will country and evidence suggests that they are not usually actually use your taxis, they will use your hotels, they 5 inclined to do so. Instances that immigrant investors do would go to your entertainment, they may use the decide to move their business to the country where they casino, they may require certain leisure activities. obtain second residency and/or citizenship, however, will And so the hope is that in so doing, that the econo- be more likely when they acquire more knowledge of the my would get a boost by the turnover of international receiving country and develop stronger ties to it. persons spending within the economy.

Furthermore, the high net worth individuals attracted by - Authorized representative, Antigua and Barbuda global citizenship programs will generate significant consumption effects whenever they travel to or reside in the receiving country. Purchases of real estate, luxury goods – particularly cars, education, professional services and Box 6. Citizenship by Investment Programs: Physical personal services are all expected to receive a boost presence for the application process from these immigrant investors and increase according Within the category of Citizenship by Investment Pro- to the time they are required to spend in the country. grams, the single visit makes a significant difference in Those who are going – who make a lifestyle decision the investors’ knowledge of the country and therefore to move their families there, educate their children scores one point on the commitment scale. there, they are going to contribute more. Because they purchase homes, they are going to be consum- ing utilities, have household staff, you know, even Citizenship by Investment Programs: Interview cars – spending money in the economy more regu- or oath larly, buying services on a day-to-day basis. Where- as (…) the ease of travel options like the Caribbean, Another policy tool Citizenship by Investment Programs you know, in some cases [the investors] may never use to generate commitment is to interview applicants even go there. So their contribution is limited to the or require them to pledge an oath. Although largely initial investment they have to make to qualify for the symbolic, this is nevertheless a way to create a stronger status. bond between immigrant investors and the country,6 and makes the immigration process less like a transaction. - Immigration lawyer, Fragomen, UK An interview or oath as part of the application process therefore scores one point for Citizenship by Investment Programs. Citizenship by Investment Programs: Physical Such an interview or oath has also been suggested by presence for the application many of the stakeholders interviewed for this report, who Immigrant investors applying to the Saint Kitts and Nevis argue that countries can use this mechanism as a way to Citizenship by Investment Program can do this without select applicants who have the predisposed attitude to ever setting foot in the Federation. The more recently in- integrate into a society. troduced program in Antigua and Barbuda does require Although this is recommended as a practice for all global investors to visit the country to complete their application citizenship programs, it is not taken into account in the process. Although this makes the program more de- assessment of Immigrant Investor Programs, because manding for investors, Antigua and Barbuda have found other requirements such as the years of residency and the economic benefits worth their while. the days of required physical presence per year, are 3/ See example of Malta: Vella, M. (2013), The Keys to the EU much more decisive for the applicant’s commitment to for € 650,000: How Malta’s Golden Passport Scheme Will Work. the country. Malta Today. Online: http://www.maltatoday.com.mt/en/business- details/business/businessnews/citizenship-individual-investor-pro- 5/ Ley, D. (2003), Seeking Homo Economicus: The Canadian State and gramme-20131016. Retrieved: 01/09/2014. the Strange Story of the Business Immigration Program. Annals of the 4/ Dzankic, J. (2012) Many Countries in the European Union Al- Association of American Geographers, Vol. 93(2), pp. 426-441. low Individuals to Purchase Citizenship: Such ‘Investor Citizenship’ 6/ Held, D. (1991), Between State and Civil Society: Citizenship. In. G. Is Unfair and Discriminatory. Online: http:/blogs.lse.ac.uk/europ- Andrews (ed.) Citizenship. London: Lawrence and Wishart. pblog/2012/05/08/citizenship-for-sale. Retrieved: 01/09/2014.

20 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Box 7. Citizenship by Investment Programs: Interview or This aspect is therefore assessed by the extent to which oath the residency requirements are reduced for immigrant investors, resulting in a score between zero and two. Citizenship by Investment Programs that require the immigrant investor to participate in an interview or pledge an oath score one point on the commitment scale. Box 9. Years of residency scores

The score on this aspect is determined by calculating the years of residency for the investor program as a propor- Citizenship by Investment Programs: Physical tion of the years required for other immigrant categories. presence for renewal of the passport To standardize this to a score between zero and two, In some Citizenship by Investment Programs, the this proportion is multiplied by two. initial application process is the only point at which the immigrant investor is required to be in contact with the country. In other cases, the renewal of the passport is = 2 conditional, depending on whether the applicant has 𝑦𝑦𝑦𝑦𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 visited the country in the first years of citizenship.1 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 ∗ 𝑦𝑦𝑦𝑦𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 Immigrant Investor Programs: Days of physi- Box 8. Citizenship by Investment Programs: Physical cal presence presence for renewal of the passport The same principle is applied to the required number of Although the process often requires only a short visit, days of physical presence. These two aspects are close- this is significantly more demanding than not requiring ly intertwined, because years of residence mean little any visit to the country at all. Furthermore, it generates without making sure that the immigrant investor actually both economic benefits and increases the immigrant spends time within the country. investor’s knowledge of the country and strengthens High net worth individuals attracted by these programs the ties to it. Such physical presence requirements as a travel frequently. Being required to spend a lot of time in condition for passport renewal score two points. a single country can be considered an important burden to them. While there are important competitive – and therefore economic – arguments to relax these require- Altogether, Citizenship by Investment Programs can ments to make the program more appealing to investors, score a maximum of four points and therefore always such waivers do make the residence requirements less score below Immigrant Investor Programs. demanding and therefore have an impact on public acceptability. Immigrant Investor Programs: Years of residency Having physical presence criteria would be recommended to maintain public acceptability per se. Experiences Fast-tracking applications for citizenship submitted by from the Canadian program, however, show that having immigrant investors is a politically sensitive issue and physical presence criteria is not sufficient to ensure that risks affecting public acceptability. Having similar resi- immigrant investors actually spend time in the country. dence criteria for immigrant investors as for any other Attention should be paid to the way their physical pres- type of immigrant is therefore an appealing political ence is monitored. message: We had discovered that a lot of people were cre- There are a lot of steps to getting your permanent ating fake documents, renting apartments and green card in the EB-5 program. And once you pretending that they lived there and have their mail actually get that, you are then on the same playing sent there and create fictional lives in Canada – and field as any other green card holder is in the U.S. So they are not a few, we are talking about hundreds of getting citizenship and a passport in the U.S. has people that are creating fictional lives in Canada. definitely enough steps and certainly does not fast- track an investor’s opportunity to get citizenship itself - Representative, Citizenship and Immigration Can- – once you get a green card you are really on the ada same playing field as every other green card holder. This study will not go into detail about the best way to - Representative, IIUSA, industry trade association monitor physical presence criteria – this is a contextual for the EB-5 Regional Center Program and ever-changing challenge as are many government issues. However, it serves as another example for a topic 1/ At the time this report was finalized, the Citizenship by Investment that could be interesting for more inter-country dialogue Program in Antigua and Barbuda reduced the required minimum and sharing of best practices. number of days that applicants must spend in the country to get their passport renewed to 5 days from 35 days.

21 Overview: commitment requirements Box 10. Physical presence scores Considering the Citizenship by Investment Programs, The score on this aspect is determined by calculating the Grenada and Saint Kitts and Nevis stand out as programs physical presence requirements for the investor program that do not require immigrant investors to be physically as a proportion of the years required for other immigrant present for the application process, participate in an inter- categories. view, pledge an oath or visit the island as a precondition to renew their passports. In practice, this means that immi- To standardize this to a score between zero and two, grant investors can obtain citizenship rights without ever this proportion is multiplied by two. setting foot in or acquiring any kind of knowledge about the country. In terms of commitment they basically position = 2 no requirements at all.

𝑦𝑦𝑦𝑦𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 Other programs have put arrangements in place to create 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 ∗ commitment among the immigrant investors obtaining cit- 𝑦𝑦𝑦𝑦 izenship. The recently introduced program in Antigua and Immigrant Investor Programs: Citizenship/lan- Barbuda has consciously decided to be more demanding guage test of immigrant investors; policy measures that would seem to help raise the program’s public acceptability. Finally, learning the national language, culture and history is often seen as an important sign of commitment. Table 6 summarizes the status of the five programs leading Programs that require immigrant investors to pass a to direct citizenship that are assessed in this paper where- language and/or citizenship test therefore score higher by the individual score for each of the three indicators on the commitment criteria. under the commitment axis is indicated in the header of the table.

Table 6. Citizenship by Investment Programs Box 11. Immigrant Investor Programs: Citizenship/lan- Physical Physical guage test Interview or presence for presence to oath required application maintain Language tests are generally more demanding for immi- process citizenship grant investors than citizenship tests, but the weight of 1 point 1 point 2 points Antigua and the requirement depends on the national context as well. Yes Yes Yes Obviously, learning the language is a more demanding Barbuda requirement in countries such as Bulgaria and Hungary, Cyprus No No Yes which has a unique alphabet and/or a language that is Dominica Yes Yes No not widely spoken outside of the national borders, than Grenada No No No in English-speaking countries. To avoid such imbalance, St Kitts and Nevis No No No requiring either a language test or a citizenship test both score one point. With Immigrant Investor Programs, the norm has been to require the same naturalization process from immigrant Together this means that Immigrant Investor Programs investors as from any immigrant category obtaining resi- can score a maximum of five points. Added to the five dence. A number of more recently introduced European points they score for initially offering residence in the programs have differed by providing a fast-track procedure first place, the commitment requirement scale scores for investors. For this reason, Bulgaria, Greece, Malta and between zero and ten. Spain do not score the maximum number of points for commitment requirements.

22 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Table 7 captures the status of the fifteen residence to citizenship programs that are assessed in this paper. The individual score for each of the three indicators under the commitment axis is indicated in the header of the table. Figure 4 illustrates the scores of each of the global citizenship programs assessed on the commitment axis. Table 7. Immigrant Investor Programs Physical Language Residency presence and/or % % (years) (days per Citizenship year) test 2 points 2 points 1 point Australia 4 100% 274 100% Yes Bulgaria 2 40% 0 0% No Canada 4 100% 274 100% Yes Greece 7 100% 0 0% Yes Hong Kong 7 100% Hungary1 n/a n/a Yes Ireland 5 100% 203 100% Yes Latvia 10 100% Yes Malta 1 20% 0 0% No New Zealand 5 100% 146 100% Yes Portugal 5 100% 100% Yes Singapore n/a n/a No Spain 10 100% 0 0% No United Kingdom 5 100% 183 100% Yes United States 5 100% 183 100% Yes

1/ The Hungarian program is known to mainly attract immigrant investors looking for second residency and not citizenship. The high score on this scale therefore does not mean that immigrant investors in Hungary are necessarily more committed to the country, but it reduces the grounds for accusing the Hungarian program of selling passports. Figure 4. Commitment requirements scores

1 The Hungarian program is known to mainly attract Immigrant Investors looking for second residency and not citizenship. The high score on this scale therefore does not mean that Immigrant Investors in Hungary are necessarily more committed to the country, but it reduces the grounds for accusing the Hungarian program of selling passports.

Transparency Reaching out to these agencies is an indication of the competitive position of the global citizenship programs Transparency featured in many interviews conducted for rather than of its impact. However, the fact that some this report as an important policy tool to preserve public governments choose to be more guarded about the acceptability, but also as the issue around which there is existence of their global citizenship program is one of the most room for improvement. aspects that sometimes confers a less than positive reputation on such programs. We argue that public support There are two possible reasons [for not disclosing for the program would be more evident if this was openly information on the performance of a program]. One communicated as a legitimate immigration channel to is that the numbers are too high and the other is that the high net worth community. the numbers are too low than any official projections. Each of these two extremes may contain different A similar process of public support could be demonstrat- risks, but withholding information does not mitigate ed towards the national community. This could entail the them. On the contrary, it may trigger speculation and public information on the outcomes the global citizenship unwanted political tensions locally and international- program has brought. ly, which inevitably results in worsened public image of the program. When you start running the program, it is critical that you also celebrate or point out the advantages - Armand Arton, Arton Capital, Dubai or the outcomes that have come from the program. Again, if I go back to previous experience, in Canada There are four indicators of transparency that are consid- we had similar reservations in some of our smaller ered for this study: regions of the country. So the governments in those provinces would make a case of putting road signs • Public support for the program on development projects. Or if we built a new school • (Annual) Evaluation studies of the program or a golf course, there would be a government logo on it saying: ‘This is brought to you by the investor • Availability of public data program’, so that the population could see tangible benefits from these programs. • Criteria for the due diligence process and standards - Representative, Citizenship by Investment Unit, Antigua and Barbuda

Public support Continuing the example with Canada, however, it seems that while some provinces made a case of promoting Part of having a transparent global citizenship program the successes of the program, at the federal level the is to have the program publicly supported by both the government has not felt able to do so, mainly because of national population and the international target group of the perceived lack of benefits. high net worth individuals. We did not have a good way to say what the bene- The main channel for governments to contact the fits are of the money that is coming into Canada. We international community of high net worth individuals is have never been able to do that, because the guar- through the largest mediating agencies, such as Arton antee on the funds, the conservative management Capital and Henley & Partners, as main specialized firms of that money within the Canadian economy. So the and immigration lawyers. They often keep close contacts structure of the program did not allow for the sort of with the various governments as well as with worldwide big, flashy announcement of: ‘look at all these things applicants. the money has done’.

- Representative, Citizenship and Immigration Canada

24 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs For Immigrant Investor Programs, the number of immi- Box 12. Public support grant investors may be derived at different stages. First, there is the number of applicants that get initial approval. Although public education and promotion is an important At this stage, they often get either a temporary residence aspect of the public acceptability, assessments of the permit or a permanent residence permit under a set of communication to the national population are beyond conditions. the scope of this study. Receiving the unconditional permanent residence permit Obviously, promotion should not be the only type of is therefore a second step, which depends on whether publicly available information. Transparency would imply the immigrant investor has met specific criteria, such more objective information. as a minimum number of days of physical presence. Programs, therefore, should publish the number of appli- That is why this aspect scores only one point on the ten- cants that continue to this stage. point scale for transparency. Finally, programs also should be open about the number of immigrant investors who eventually obtain citizenship rights. The extent to which immigrant investors pur- Evaluation sue citizenship rights is an interesting outcome of the Programs should be promoted, but also the outcomes program. It indicates to what degree immigrant investors should be made publicly available and regularly re- have been residing in the country, have the intention of viewed. The sustainable implementation of global citizen- staying there and making a wholesale lifestyle move. ship programs requires that governments monitor and report their program’s performance on a regular basis. Box 14. Public data on the number of approved inves- I think there should be an annual report that says, tors you know: ‘Last year we had x number of investor immigrants, that have raised x amount of Canadian Immigrant Investor Programs can score a total of three dollars and the Canadian government has generally points, for each of the phases on which they report data. spent those dollars in the following four ways’. (…) For Citizenship by Investment Programs, there are only In other words, informs Canadians how this money two options; they either publish the number of immigrant is being used and demonstrate that this is a positive, investors or they do not. Because applicants obtain net benefit. citizenship rights immediately, however, this is a more sensitive issue. Therefore, the single publication of the - Sergio Marchi, Minister of Citizenship and Immigra- outcome will also score three points. tion Canada (1993-1996)

At the moment, the UK study is the first publicly available government-initiated evaluation study. From interview Publicly available background data data, however, it seems that Canada and New Zealand are also currently working on an evaluation study. There Researchers interviewed for this study have indicated are no programs that publish the annual outcomes of that availability of background data on immigrant inves- their programs yet. tors and the type of investments they support would be an important asset to make independent assessments of the performance of the program.

Box 13. Evaluation Certainly in terms of recommendations, I think a little On this scale, programs score one point if there have more transparency on who, on how many people been any evaluation studies and two points if this eval- applying and some characteristics of those appli- uation process takes place on a regular basis. For the cations, like for example, just basic stuff like the na- moment, the scores on this item are very low. tionalities of the people, the ages of the people, you know, for example, are the programs bringing in persons who have like a couple of years of experience behind them? (…) It would be really useful to have Public data on the number of approved information on the types of projects that receive investors investments as a result of these programs. And that is basically missing, as far as we can tell. There is The outcomes of the program should not only be avail- some, in some cases where the government has able in the evaluation study, but also as a set of raw data more than one, you know, where they have an op- from which researchers can draw their own, independent tion to invest in bonds, and then they have an option conclusions. to invest in real estate, they may break it down between how many people are in each category. That A first outcome that every government should publish is is very unusual. the number of immigrant investors that have obtained residency and/or citizenship for each year. Such figures, - Researcher, Migration Policy Institute, U.S. unfortunately, are largely lacking at the moment.

25 The minimum information that should be made available firms, who in fact, in theory, are advocates for is on the applicants’ nationality and family composition. applicants, and we are working for governments – it Family composition provides a sense of how many per- could be perceived as a conflict of interest. mits are issued for a single investment. Nationality is an interesting characteristic to know in itself, but can also - CEO, due diligence firm form an indication of other characteristics. Another problem could be that particular agencies may The finding that a large share of the total number of not be regional experts. It is beyond the scope of this immigrant investors comes from countries with political report to advise on when to use a due diligence firm and unrest, for example, indicates that security may be an how to make that choice. However, a recommendation important motivation for this immigrant class.1 Further- would be to at least publish some information on due more, comparing the national background of applicants diligence partners. to the investor category with those of other immigrants I do not know that there is any evidence of how could shed light on why certain individuals come in effective those, the security screening processes, through particular immigration channels.2 are. So I think that is, like, the big unknown of the Finally, to enable researchers to make their independent projects. I do not think you can eliminate the risk that assessments, information should be available about the people will get through the program who, you know, types of investments supported by immigrant inves- would have been considered undesirable. tors. In cases where the type of investments is open for - Researcher, Migration Policy Institute, U.S. choice, such as in New Zealand and the UK, this would mean to publish at the very least how many Immigrant After conducting the background checks and any other Investors have chosen to purchase government bonds, investigation, it is important also to share evaluation how many have bought shares in businesses and how standards for these processes. There are some obvious many have invested in real estate. For programs that and internationally recognized standards – mainly that vi- have only a single government-led investment fund, this sas are not issued to people with criminal backgrounds. would mean that they publish a report of what has been However, controversies about particular applicants may done with the funds acquired through this program. prove more nuanced, for example when someone has pressed charges against an applicant.

The following stakeholder argues that having a court Box 15. Publicly available background data case against an applicant is not necessarily problematic. The availability of background data scores a maximum of If it is a civil matter – and we assess each case on its two points. One point is scored by programs that publish own merit – you know, and there is no wrong finding information on the nationality and family composition against the client, we may require further probing. of the immigrant investors. Another point is scored by Because civil actions can be bought by anyone programs that provide information on the types of invest- against you and so it may not be fair. If there is an ments supported by Immigrant Investors. action bought against you that is unmerited and the courts did not find any wrongdoing. So we are open to that and to fully assessing and analyzing what the Due diligence circumstances around that matter may be.

Finally, there is scarce information published currently - Authorized representative, Antigua and Barbuda about due diligence processes. Although governments Others argue that countries could afford to be more often conduct their own due diligence investigation, selective in those cases and make a risk assessment. immigrant investors come from very different parts of the It is then up to individual countries to decide what level globe and no single agency or government body has the of risk they are willing to accept. This is again one of the expertise to deal with all of these different countries. matters on which international sharing of standards and There is very little transparency on the due diligence best practices would be desirable. Rather than recom- firms that governments work with and in what circum- mending a particular strategy or level of risk that should stances. This can be problematic because there could be accepted, the recommendation would be to make be conflicts of interest. the standards of risk acceptance publicly available.

If we are in one case representing the government and in another cases representing Arton or Henley, Box 16. Due diligence or whatever – if we are providing work for those

1/ Wealth-X and Arton Capital, A Shrinking World: Global Citizenship On the transparency scale, programs score one point for UHNW Individuals. Online: http://www.artoncapital.com/docu- for being open about the due diligence partners they ments/publications/Arton-Capital-Wealth-X-Report-web.pdf. Retrieved: work with and one point for openly communicating the 01/09/2014. standards that guide such processes. 2/See for an example in Canada Hiebert, D. (2008), Big Potential, Small Reward? Business Class Immigration to Canada. Migracões. Vol.3, pp. 31-47.

26 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Overview: transparency In Table 8, information is provided for all programs that are being assessed in this paper, whereby the score for The criteria selected for this axis leave a lot of room for each indicator under the “Transparency” axis is provided improvement for all global citizenship programs. Very in the header of the table. few actually publish data on the number of applicants to the program, let alone background data of these The recent evaluation study in the UK has triggered more applicants. In the cases where the number of initial research activity, but particularly in countries that already approvals is publicly available, the number of immigrant have relatively large datasets already publicly available. investors that eventually obtain citizenship rights usually Since many stakeholders promoted more international is not disclosed. The UK is the only country that has standards and best practices on transparency, it would published recently a government-initiated report on the be interesting to see how more conservative administra- performance of the investor route. None of the programs tions, such as the Caribbean states, will deal with this in specify what types of investments were supported by the future. immigrant investors or share information about the due Figure 5 illustrates the total score of each program under diligence process. this axis.

Figure 5. Transparency

27 Table 8. Transparency

Data availability Publicly Evaluation Background & program supported study investment type uptake 1 point 2 points 3 points 2 point Antigua and Barbuda Yes None None 0 Australia Yes None None 0 Bulgaria No None None 0 Canada Yes None Residence 1 Cyprus No None None 0 Dominica Yes None None 0 Greece No None None 0 Grenada Yes None None 0 Hong Kong No None None 0 Hungary Yes None None 0 Ireland No None None 0 Latvia No None None 0 Malta Yes None None 0 New Zealand Yes None Residence 1 Portugal Yes None None 0 Singapore Yes None None 0 Spain Yes None None 0 St Kitts and Nevis No None None 0 United Kingdom Yes One-off Residence 1 United States Yes None Residence and 1 conditions removed

28 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Economic weight required investment relative to GDP per capita. This effectively expresses the investment as a number of The investment criteria form the most important indica- average annual incomes. tion of what governments can do to maximize economic benefits. However, the significance of these measures The principal drawback of this approach is that the eco- depends on the economic context as well. nomic weight is determined without considerations for both the number of immigrant investors and the national Take the UK, for example. The minimum qualifying population. Both numbers would make a difference – to investment is a million pounds at the moment. Now the total amount contributed through the global citizen- a million pounds in itself, I am sad to say, is not ship program and to the total GDP. a huge factor for the UK economy. (…) But if we take Saint Kitts, for example, you know, there is a An alternative would be to consider the total amount 400,000 dollars minimum, but, you know, 400,000 invested through a global citizenship program and divide dollars is a much more meaningful contribution to this by the national GDP. However, for larger countries, the Saint Kitts economy than a million pounds to the the outcome unavoidably will be extremely low. This UK economy. reflects the actual situation, because in a large economy such as the U.S. or the UK, the global citizenship pro- - Immigration lawyer, Fragomen, UK gram is always a ‘drop in the ocean’. Foreign investment comes to the United States routinely, in large volume, For smaller economies that otherwise have attributes with miniscule help from EB-5.1 to attract investments, the economic sense of having a global citizenship program is much higher. The gross domestic product per capita provides an easily interpreted measure, however. Furthermore, the We recognize that the kinds of flows that used to relative number of applicants to the total population also come to small countries are no longer going to has social/political drawbacks, which are reflected in the come. Nobody is interested in parking a few dollars social capacity scale. This paper develops this approach. here or there, simply because they feel like they have to do it out of the goodness of their hearts.

- High Commissioner of Saint Kitts and Nevis Box 17. GDP per capita

Up to now, the attention to international comparisons The score on this aspect is determined by dividing the between countries and program has hidden large differ- minimum required investment under a particular program ences in economic weight. This indicator will therefore by the country’s GDP per capita. This figure is calculated assess the required investment under different programs as a three-year average and based on data from the CIA within the country’s economic setting, measured by: World Factbook.

• GDP per capita To standardize this to a score between zero and ten, the scores are multiplied by a factor, which in this case is .1. • External debt per capita = .1

𝑦𝑦𝑦𝑦 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 ∗ GDP per capita 1 / North, D. (2012), 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸The 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠Immigrant𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑑𝑑𝑑𝑑𝑠𝑠𝑠𝑠 𝑑𝑑𝑑𝑑Investor𝐸𝐸𝐸𝐸 𝑝𝑝𝑝𝑝𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑠𝑠𝑠𝑠 (EB-5)𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑐𝑐𝑐𝑐𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 Visa: A Program That Is, and Deserves to Be, Failing. Online: http://www.cis.org/inves- The first way to consider the economic weight of any tor%20visa%20program%20is%20failing. Retrieved: 01/09/2014. global citizenship program is to calculate the minimum

29 External debt per capita Overview: economic weight

The second variable to assess the economic contribution The minimum investment amount for global citizenship in comparison to the national economy is to calculate it programs ranges from a requirement of four times the as a factor of the external debt per capita. This express- average annual income in Spain, to 128 times the average es the minimum invested amount in terms of the average annual income in Cyprus. Expressed as a function of ex- debt of how many people it covers. Global citizenship ternal debt per capita, the investments in Ireland cover the programs essentially contribute to the increase of foreign least with only twice the external debt per capita, while direct investments in the economy, which is one of the Cyprus again poses the highest demand, with 99 times means to finance the deficit in the country’s current the external debt per capita. The findings for all programs account. assessed in this paper, are presented in Table 9.

Comparing the top five countries with the highest impact of investments, it becomes clear that only in the case of Box 18. External debt per capita Cyprus the highest required minimum investment makes The score on this aspect is determined by dividing the this the investment with most economic weight. In coun- minimum required investment under a particular program tries such as the United Kingdom or Ireland, the invest- by the country’s external debt per capita. This figure is ment sum is quite high in an internationally comparative calculated as a three-year average and based on data context, but not in comparison to the national economy. from the CIA World Factbook. The economic weight is by far highest for the Citizenship To standardize this to a score between zero and ten, the by Investment Program in Cyprus. Although the Carib- scores are multiplied by a factor, which in this case is .1. bean states do not score particularly high in this comparison, it should be noted that the very low population size of these countries would make the total investments = .1 through global citizenship programs a more significant share of the total GDP and external debt. The total scores 𝑦𝑦𝑦𝑦 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 ∗ of all programs under the “Economic weight” axis are illus- 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑑𝑑𝑑𝑑𝑠𝑠𝑠𝑠𝑑𝑑𝑑𝑑𝐸𝐸𝐸𝐸 𝑝𝑝𝑝𝑝𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑠𝑠𝑠𝑠𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑎𝑎𝑎𝑎𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 trated with Figure 6. Both aspects have equal weight in determining the economic weight, which is therefore calculated as the average of the two outcomes. Ten points are the maxmum to take on in this scale.

Figure 6. Economic weight

30 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs

Table 9. Economic weight

Nominal investment / Nominal investment / Minimum investment external debt per GDP per capita1 capita2 5 points 5 points Antigua and Barbuda US$ 250,000 14 38 Australia AU$ 1,500,000 33 35 Bulgaria BGN 1,000,000 49 55 Canada CA$ 800,000 17 27 Cyprus € 2,500,000 128 99 Dominica US$ 100,000 7 9 Greece € 250,000 13 8 Grenada US$ 250,000 18 24 Hong Kong HK$ 10,000,000 25 7 Hungary € 250,000 18 15 Ireland € 1,000,000 16 2 Latvia € 250,000 18 12 Malta € 650,000 31 43 New Zealand NZ$ 1,500,000 44 35 Portugal € 500,000 30 13 Singapore US$ 250,000 15 19 Spain € 500,000 4 4 St Kitts and Nevis S$ 250,000 22 13 United Kingdom £ 1,000,000 46 11 United States US$ 500,000 14 13

1/ CIA World Factbook 2012, 2013 2/ Idem

Table 10. Top five investment amounts relative to the national economy

Nominal investment As a factor of GDP per As a factor of external debt capita per capita 1. Cyprus Cyprus Cyprus 2. United Kingdom Bulgaria Bulgaria 3. Australia United Kingdom Malta 4. Ireland New Zealand Antigua and Barbuda 5. New Zealand Australia New Zealand

1 CIA World Factbook 2012, 2013 2 Idem

31 Social capacity population, this of course depends on the extent to which they take up residency in the receiving country as Managing public acceptability and legitimacy of the pro- well. Particularly in Citizenship by Investment programs, gram can be governed by commitment criteria, transpar- this is usually not the case. However, people hold onto ency and a sound due diligence process. However, as in their citizenship status for the rest of their lives and many the case of the economic weight, in the end the impacts use this as an insurance policy, may they ever be forced depend on the national context as well. In this case to flee their country. Furthermore, the number of immi- this is a simple matter of numbers. For this scale, social grant investors could still be significant in terms of the capacity is determined by: land they buy, albeit without residing in the country.

• The number of approved applications relative to the For that reason, when immigrant investors start making national population up a large part of the national population, this brings risks that should be taken into account for this impact • The number of approved applications relative to the study. annual immigrant intake

Population Box 19. Immigrant investors relative to national popula- The relative size of the approved immigrant investor ap- tion plications to the national population has important consequences for the perceived legitimacy of the program The score on this aspect is determined by dividing the and the potential integration costs. total number of approved applications (both for investors and their qualifying family members) by the national The most important risk for programs that fail to main- population. This figure is gathered from the CIA World tain legitimacy is that the international community may Factbook. withdraw existing visa-free travel rights. This is a very rare political consequence, which only occurs in extreme To standardize this to a score between zero and ten, cases. However, it has happened in the past, for ex- the scores are multiplied by a factor, which in this case ample when Canada withdrew its visa-free travel rights is 2,500. The larger the relative size of the immigrant for citizens of Dominica and Grenada because of their investor intake, the higher the risk of social and political Citizenship by Investment programs. consequences. Therefore, the scores are reversed. = 10 ( 2500) Although this is a response to scandals rather than sheer numbers, such sanctions seem more likely when immi- 𝑦𝑦𝑦𝑦 grant investors comprise a large share of the population. 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 − ∗ 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑠𝑠𝑠𝑠𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 𝑝𝑝𝑝𝑝𝑠𝑠𝑠𝑠𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 Integration costs refer to the costs to public facilities Immigrant intake (such as schools, hospitals) and infrastructure (roads, The size of the Immigrant Investor intake compared to transportation). It is highly unlikely that the immigrant the total number of immigrants is an important argument investors’ group contributes significantly to such costs, to managing public acceptability. While Canada, for but this depends on their relative size compared to the example, accepts many Immigrant Investors each year, national population. the fact that a large number of other immigrant catego- Apart from the relative size of the immigrant investor ries are accepted as well makes this a less controversial issue.

32 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs It was not, like 22 percent, or 42 percent or 70 per- Overview: social capacity cent of immigrants were high net worth and then the charge would have been that we are only interested Obviously, immigrant investors make up only a marginal in people with deep pockets, when in fact most of share of the national population in any country. Viewed the immigrants that come to Canada do not have from a comparative perspective, immigrant investors deep pockets. They have big hearts and job skills form a much more significant group in smaller states and drive, which has been always the history of im- such as Antigua and Barbuda and Saint Kitts and Nevis, migration. So I think the fact that it was only two to or, to a somewhat lesser extent, Cyprus and Malta. three percent did not lend itself to the kind of outcry. Compared to the total immigrant intake, immigrant inves- - Sergio Marchi, Minister of Citizenship and Immigra- tors form a relatively large group in Latvia. Presumably, tion Canada (19913-1996) their share is even higher among the immigrant intake of the smallest countries mentioned before. Due to a lack of data on the number of immigrants to these countries, these are assessed at the maximum score. The data for Box 20. Immigrant investors relative to total immigrant all programs is presented in Table 11. intake Due to the sheer size of the immigrant investor stream The score on this aspect is determined by dividing the relative to the national population and annual immigrant total number of visas issued (both for investors and their intake, political ramifications of global citizenship pro- qualifying family members) by the total immigrant intake. grams are unlikely to occur in the North American and This figure is gathered from the CIA World Factbook. most of the European countries. The Caribbean islands To standardize this to a number between zero and ten, that have global citizenship programs are more likely to the scores are multiplied by a factor, which in this case is experience such issues, as are smaller European coun- 100. The larger the relative size of the immigrant investor tries. Latvia stands out as the program with the highest intake, the higher the risk of social and political conse- influx of immigrant investors compared to the national quences. Therefore, the scores are reversed. population and the annual immigrant intake. This raises questions about social pressure to the country, particularly because this is an Immigrant Investor Program that = 10 ( 100) requires applicants to actually reside in the country. 𝑦𝑦𝑦𝑦 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 − ∗ 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑠𝑠𝑠𝑠𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑠𝑠𝑠𝑠𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖𝑖𝑖𝑠𝑠𝑠𝑠 These aspects receive equal weight, so the total score on the social capacity scale is the average of these two scores. Figure 7. Social capacity

Table 11. Social capacity

Immigrant Investor As share of the total As share of the total visas population immigrant intake Antigua and Barbuda 125 .14% Australia 1,203 .01% .6% Bulgaria 228 .00% 1.2% Canada 9,359 .03% 3.3% Cyprus Dominica Greece Grenada 125 .11% Hong Kong 2,207 .03% Hungary 1,075 .01% 4.1% Ireland 38 .00% .1% Latvia Malta 465 .11% New Zealand 438 .01% 1.0% Portugal 618 .01% 1.9% Singapore 1500 .29% Spain 746 .01% .1% St Kitts and Nevis 308 .00% United Kingdom 1,590 .00% .4% United States 5,677 .00% .5%

34 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Combined scores Figure 8 combines the scores on the five axes. There are obviously limitations to combining these different measures. Maximizing economic benefits, maintaining public acceptability and preserving legitimacy of the program are different goals and the five scores contribute to these to different extents.

Still, the following graph can be seen as a useful first indicator of how different programs address these issues.

Figure 8. Combined scores

Social capacity 30

25 Economic weight

20 Transparency

Investment 10 requirements

5 40 Commitment requirements 0 35 40 Social capacity 30 35 40 25 Social capacity Economic weight 30 35 40 20 25 Social capacity Economic weight Transparency 30 15 35 * Social capacity indicator is missing 20 25 * Social capacity indicator is missing Social capacity Economic weight Transparency Investment 10 requirements 30 15 20 5 25 Economic weight Transparency Investment Commitment 10 requirements requirements 15 0 20 5 Transparency Investment Commitment 10 requirements requirements 35 15 0 5 Investment Commitment 10 requirements requirements 0 5 Commitment requirements 0 * Social capacity indicator is missing

* Social capacity indicator is missing

Case assessments

The remainder of the report addresses the outcomes of sovereignty from Hong Kong to Mainland China1 – and in a small number of case studies: Canada, the U.S., described by stakeholders as a non-controversial policy, the UK, New Zealand, Bulgaria, St Kitts and Nevis and at that time not associated with the public acceptability Antigua and Barbuda. The case studies complement the issues that global citizenship programs face today. outcomes of the framework with more details on the program and its particular challenges and outcomes. Oftentimes now critics think about it as ‘buying a passport’ or something like that, but the idea then, The case assessments are based on secondary litera- that was used as justification for the program, would ture and interviews with key stakeholders. Both of these be that Canada would receive a group of people sources differ considerably between different contexts. who might become disenfranchised – in terms of The recently halted Canadian Federal Immigrant Investor China taking over Hong Kong – and that they have Program has been most accessible for the assessment lots of capital and they needed to move it some- for several reasons. As a longer established program, where, and that Canada would be the place they it has elicited more scrutiny from researchers. As a move it to. program in an open democratic society and a large migrant-receiving country, it is one of the countries that - Researcher, University of British Columbia, Canada most openly share immigration data. Lastly, as the most- The number of applications peaked in the early nineties – used Immigrant Investor Program worldwide, all con- presumably due to increased demand from Hong Kong sultants that participated in the study had considerable at the time it transferred sovereignty to China. After- experience with the program, as opposed to newer or wards, the number of applications has fluctuated but smaller programs. generally increased over the past decade. In 2012, the The case assessments of Bulgaria and Saint Kitts and program had 2,616 principal applicants, resulting in the Nevis are most limited in scope. In both cases, no gov- immigration of a total of 9,359 persons. As the program ernment representative or government partners partici- that received the largest number of applications, its de- pated in an interview. Interview sources therefore remain sign was obviously attractive to Immigrant Investors. limited to consultants and in both cases one investor We obviously compete with other countries and who migrated through these programs. Furthermore, Canada was very, you know, able to meet the both countries do not publish any information on the competitive edge because, you know, based on our outcomes of their programs. standard of living here, based on the tax advantages of coming here and based on the program – when it Canada existed, we were very competitive

This assessment concerns the Federal Immigrant Inves- - Immigration lawyer, Green & Spiegel, Canada tor Program of Canada, which is currently suspended and in the process of redesign. The province of Quebec Ever since the introduction of the program, by far the is still accepting applications to a fairly similar program. largest source country of immigrant investors has been China. In the early 1990s, a significant group of investors In 1986, Canada was the second country introducing migrated from Taiwan. By the turn of the century, the an Investor Immigration Program – Saint Kitts and Nevis share of investors from Taiwan steadily decreased, while was the first in 1984 – and the first to offer residency for investment. It was designed in response of the transfer 1 / Froschauer, K. (2010), East Asian and European Entrepreneur Immigrants in British Columbia, Canada: Post-Migration Conduct and Pre-Migration Context. Journal of Ethnic and Migration Studies, Vol. 27(2), pp. 225 – 240.

36 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Iran and Korea became more important sending coun- Investment requirements tries. The majority of applicants, however, continue to be Chinese.2 The investment requirements have gone through a number of significant changes. Most notably, the original Figure 9. Total annual number of applicants since 1986 scheme left the type of investments up to the investor’s (source CIC) choice, whereas there is only a single investment option in the most recent scheme.

Before the current halt to the program, investors were required to meet the very straightforward requirement of putting CA$800,000 in government bonds for a period of five years. When the investment matured, the full amount was returned without interest.3

Moreover, investors could use a financing option. This means that they paid a reduced amount to a Canadi- an financial institution, which used to get a loan for the required CA$800,000. Interview data suggests that this is by far the most used option. Considering that the financial institution charges interest, the financing option is more costly option in the long term. However, in the meantime it leaves the investors with more resources at liberty to invest in more profitable enterprises – often in their source countries where they are more comfortable doing business.

They have given the option of putting in Although the high number of applications could be [US$]180,000, walk-away and take the remaining seen as an advantage since it generates more invest- 620,000, keeping it. Now if they take the 620,000 ments, the Canadian program has faced difficulties with and they only make ten percent a year; that is a surplus of applications that has led to an increasing 62,000 a year. (…) So in programs where there is backlog. This backlog has been extremely difficult to ad- a financing option, people always go for the lesser dress. With consideration for potential public resistance, amount. And in Canada this is very evident too, the number of approved applications cannot simply be because the overall majority – nearly all my clients – increased. they always go for the financed option, or walk-away option. It is not necessarily as easy as throwing more resources at it. To process more applications, we have - Immigration lawyer, Dubai to work within the immigration levels that have been reported to Parliament, so we cannot just simply While the financing contribution has made the Canadian process more applications to get rid of the backlog. program an attractive option for investors, the economic (…) Sometimes stories appear in the papers, people benefits of acquiring this money from financial institutions who look at the programs, for example refugee already operating in the Canadian economy are ques- programs and are saying: ‘Why are we not taking tionable.4 Competitors, such as the U.S., go to consider- more?’ (…) So it becomes a very difficult political able lengths to ascertain that the invested sum is at risk. task to just say: ‘There are a lot of people who want to come under this program, why do we not just You have to ensure that there is real wealth behind create more space for them?’ that capital investment, to ensure that you really are absorbing a certain amount of wealth into the U.S. - Representative, Citizenship and Immigration economy. Canada - Representative, IIUSA, industry trade association One of the goals in the yet-to-be-released redesigned for the EB-5 Regional Center Program program is to decrease the number of applications to – in the words of a representative from Citizenship and Another significant change to the Canadian program was Immigration Canada, “a type of program that admits, po- that the minimum required amount was doubled in 2010, tentially, in the hundreds of immigrants each year, versus when it went from CA$400,000 to CA$800,000. Howev- in the thousands that we had previously.” er, perhaps as a consequence of the continuing financing option, this has changed little to demand.

4/ Migration Advisory Committee (MAC) (2014). Tier 1 (Investor) Route: 2 / CIC statistics Investment Thresholds and Economic Benefits. Online: https://www. 3/ Kälin, C. (2013) Global Residence and Citizenship Handbook: Third gov.uk/government/uploads/system/uploads/attachment_data/ Edition. Zürich: Ideos. file/285220/Tier1investmentRoute.pdf. Retrieved: 01/09/2014.

37 In a comparative perspective, the investment criteria for at least four years in order to qualify for citizenship, under the most recent Canadian program seem relatively during which they should have been physically present low. The minimum investment amount is higher than in in Canada for at least 1,095 days (75% of the time). the U.S. However, in the U.S., this amount is invest- Moreover, as any other immigrant category in Canada, ed at risk, while in Canada it is a guaranteed loan. We investors need to pass a citizenship and a language test therefore recommend that Canada should consider the in order to obtain citizenship. investment to keep up with competitors such as the UK, New Zealand and Australia and to give the investments These commitment requirements ease the program’s more economic weight relative to the Canadian econo- public acceptability. Furthermore, they are designed to my. generate ancillary business activities and consumption effects for the Canadian economy. This is stated by Citi- Moreover, the construction with only a single investment zenship and Immigration Canada as an important aspect option seems outdated. Since the full amount is repaid of the program rationale, which actually does not seem after five years, the only actual benefit to the Canadian to produce the desired results.5 government is saving out the interest. At the moment, interest rates on Canadian bonds hover around one It was not a cash-for-passport program. There were percent. This means that after a five year period, the requirements within the program that you had to economic benefit of the loan is about CA$80,000 (about have managerial experience that you had to have US$73,000). had prior – you could not, for example, be an investor if you inherited the money. You had to have made When the program was created, twenty years ago, the money, you had to show that you had some interest rates in Canada were eight to nine percent equity in some kind of business employment in your and investors were required to invest in government home country. We were looking for people who were bonds at zero percent. So the government’s eco- natural entrepreneurs. (…) You can look at it in terms nomic incentive was, of course, to finance several of two objectives. There is the investment compo- billion dollars at zero cost compared to eight per- nent and how we want that to benefit Canada, and cent. So you can calculate that the benefit was then there is the actual immigrant component as very important. Today, interest rates in Canada are well. What we would like this individual to do with his around one percent. So between zero and one per- immigration. In an ideal situation they would come cent there is not a lot of benefit for the government, to Canada. Under the program, what we are seeing economic benefits. And this is where the political is that we are not getting a great deal of benefit out and social costs are increasing and taking over the of the investment and it is questionable whether the economic benefit. actual investors are actually coming to Canada and settling and making their contribution here. - Armand Arton, Arton Capital, Dubai - Representative, Citizenship and Immigration Another option to raise the investment requirements Canada of the program is to provide different options for the investors to choose from, rather than a single fund. The As mentioned previously, there seems to have been options could still be government-managed, considering a lack of compliance with the residence and physical that the Canadian government has clearly preferred this presence criteria that until recently remained unnoticed. over leaving the options up to the market – but include There apparently have been considerable attempts to more categories that may be beneficial to the economy. evade the residence requirements. This type of cheat- ing has been mentioned as one of the motivations for How can you – for example – dedicate this program the recent decision to stop and redesign the program. to raising investments that go towards infrastructure Addressing this issue would definitely be an important building in Canada? That is not permitted right now, step for the Canadian program to maximize the benefits under the regulations and legislation, but that is cer- of generating commitment to the country among the tainly one attractive area, because the whole issue of Immigrant Investor class. infrastructure is very needed, for any country.

- Sergio Marchi, Minister of Citizenship and Immigra- tion Canada (1993-1996) Transparency

In the current comparative perspective, the Canadian program is one of the few that is very open and transpar- Commitment requirements ent with its public support and available data. After obtaining residence by means of the CA$800,000 investment, the process of obtaining citizenship is exact- ly the same for investors as it is for other immigrant cat- 5 / Hiebert, D. (2008), Big Potential, Small Reward? Business Class egories. Applicants need to have their residency permit Immigration to Canada. Migracões. Vol.3, pp. 31-47.

38 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs The most obvious shortfalls in available data are any Overview: Canada publications on what is done with the investments collected by the government. These investments are The Canadian investor program was one of the preferred distributed among the provinces, but there are no data immigration options for high net worth individuals, es- on what the provinces do with it. This raises concerns pecially from China. It is also one of the longest-running among stakeholders, particularly the concern that not and most widely accepted programs. It has served as a much is actually done with the investments at all. model to many other countries that currently have global citizenship programs and stakeholders from all over the Some of the provinces just keep it in their bank world are curious to see what the new program design accounts and that is it. The province of Ontario, for will look like. example, which is the largest province in Canada, does not do anything with the money and proba- The brief assessment in this study suggests that the bly has close to one billion dollars sitting in a bank main improvements to the program could be aimed at account. It is ridiculous. maximizing economic benefits. Providing more than one investment option could pursue this goal. Perhaps a - Immigration Lawyer, Green & Spiegel, Canada somewhat higher investment amount would be feasible. In any case, it seems advisable to restructure the current financing option.

Interviewees suggested that the revised program should not necessarily attract the same number of applicants the currently halted program has done. This goal seems to make sense, firstly because of the current backlog in the number of applications. Secondly, under the current scheme, investors make a relatively small contribution to the Canadian economy.

Figure 10. Canada

Commitment requirements 10 9 8 7 6 5 4 Transparency 3 Investment requirements 2 1 0

Social capacity Economic weight

39 United States Investment requirements

The United States introduced the EB-5 program in 1990 Similar to the Canadian program, the U.S. EB-5 program and largely modeled it after the Canadian program. The was initially designed as a more active investment pro- U.S. program has rapidly increased in popularity over the gram. To meet the criteria, applicants needed to invest past ten years. In previous years, it has been referred to US$ 1,000,000 at risk in a new commercial enterprise as the ‘most complicated subspecialties in immigration and be actively involved in its management. The en- law’.1 In 2012, 5,677 investor visas were approved. With terprise should create full-time employment for at least this, the volume of investor visas approved in the U.S. is ten United States citizens. However, it seems that the about 60% of the number approved in the main destina- relatively active investment option – which of course still tion country, Canada. does not require the investor to be personally involved with the businesses invested in, as entrepreneur tracks The backlog of the Canadian program could play a part do – appeared to be a drawback to some immigrant in the increasing number of applications to the U.S. The investors. current halt to the Canadian program is definitely expected to increase the number of applications to the U.S. An additional pilot program, introduced in 1992, ad- program even further. dressed this issue. This pilot program combined the demand for more passive investment options with the Figure 11. Total annual number of applicants since 1991 economic objective to direct investments to disadvan- (source USCIS) taged geographic areas.2

Under the pilot program, Regional Centers were introduced. These are enterprises in a targeted area, including rural areas or urban areas with unemployment rates of at least 150 percent of the national average. Instead of investing a million US dollars in a new economic enterprise, investors are given the alternative option of investing half a million US dollars into a Regional Center. These Regional Centers are established and managed by United States entrepreneurs, so there is no need for the investor to actively manage the investment. This investment is still required to create ten full-time jobs, but this can include both direct and indirect employment.

The Regional Center option is by far the most popular alternative; about 98% of the applicants invest in a Re- 1 / Yale-Loehr, S., C.S. Lee, N. Hinrichsen and L. Schoonmaker (2009). EB-5 Immigrant Investors. Online: http://www.abil.com/articles/ gional Center. EB-5%20Immigrant%20Investors%20(Yale-Loehr).pdf. Retrieved: 01/09/2014. The investment sum of US$500,000 under the Region- On why the EB-5 program did not make a good start: Rose, R.R. al Center Program is relatively low, compared to the (1992), Fixing the Wheel: A Critical Analysis of the Immigrant Investor competitors from countries with similar quality of life and Visa. San Diego Law Review, Vol. 29, pp. 615 – 642. GAO (2005), Immigrant Investors: Small Number of Participants At- travel access, such as Canada, the UK, New Zealand tributed to Pending Regulations and Other Factors. Online: http://www. gao.gov/products/GAO-05-256. Retrieved: 01/09/2014. 2 / Maltby, S.J.O. and E.L. Poreda (2013). United States. In: Magrath (ed.) The Corporate Immigration Review: Third Edition. London: Law Business Research Ltd.

40 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs and Australia. However, the investment criteria do make Commitment requirements the US investments more risky than its competitors. The U.S. program initially provides investors with a two- The required financial and immigration risk that is year conditional residence permit. After two years, the inherent in the EB-5 program really is unique and conditions to the residence permit are removed, provid- that does merit consideration in the amount that the ed that the investor has been physically present in the minimum capital would be raised to. US at least half of the time.2

- Representative, IIUSA, industry trade association Under the same criteria, the investor can apply for for the EB-5 Regional Center Program citizenship after five years. To obtain citizenship, the applicants should furthermore pass a language and a One of the interviewed stakeholders argued that the size citizenship test, making the naturalization process for of the invested amount tended to affect the quality of the investors equal to the requirements for any other immi- project developers attracted to the scheme. grant category. My stepson (…) is involved in the venture capital Transparency business. And I told him about this and he said: ‘Half a million dollars at a time? That is peanuts! (…) [The The U.S. publicly supports and markets its program. program attracts] marginal investments in terms However, it could be more transparent with regard to of that if they were any good at all, they would be program evaluation. Up to now, there have not been any involved in the capital markets in the United States. government-led studies on the impact of the US EB- You do not go through the trouble of seeking EB-5 5. Nor have there been any economic reports on what investments unless you really cannot raise the mon- types of investments have been supported. ey in any other way. Data is available, however, on the annual number of - Researcher, Center for Immigration Studies, US applicants to the program, as well as the number of applicants that obtain an unconditional residence permit Another stakeholder, however, argues in favor of the after two years. A problem in assessing this percentage smaller investment sum, explaining that it fits in with is that there is a backlog, so you cannot be sure from current, more risk-averse strategies of pooling different what pool the annual applications for these visas stem. smaller sized investments. This percentage is estimated by adding up all approvals Post-recession in the United States in particular, for conditional resident status up until 2010 and calculat- we now live in a very different capital market where ing all the approvals for removal of the conditions up until risk is being broken up on the front end of capital 2012. In this way, it seems that 76 percent successfully formation And that seems to a much healthier way applied for the removal of the conditions. This is a con- to break up risk, you know. Leading up to 2008, of servative estimation, since some applications for removal course, risk was broken up on the back-end; it was of conditions may still be in the pipeline. sold out the back door through sophisticated securi- Transparency, although relatively high compared to other ties that were pieced together. So if you have a proj- programs, could be increased by having government-led ect here in the U.S. today and you are really looking evaluation studies, publicly available data on the types of to make sure you have a fully capitalized deal, you investments supported by the total program and publicly really have to be very adaptable and creative in available guidelines for the partners and standards of the securing such funding. So it is pretty common for due diligence process. those who have a project, as they are tying and looking for different capital sources, to explore other USCIS electronic databases do not include infor- options and of course explore the EB-5 program as mation on where immigrant investors established one of those options as well. their businesses, the extent to which the businesses remained in the original location, the types of busi- - Representative, IIUSA, industry trade association nesses established, the number of jobs created, or for the EB-5 Regional Center Program the number of Immigrant Investors who applied for 3 Issues around project developers in Regional Center US citizenship. projects have been the biggest cause of resistance for 1 the US EB-5 program so it would make sense to recon- 1 / See for example North, D. (2013), It’s Beginning to Look Like Wa- sider how much the investment amount could contribute tergate in South Dakota EB-5 Case. Online: http://www.cis.org/north/ to attracting more successful projects. its-beginning-look-watergate-south-dakota-eb-5-case. Retrieved: 10/09/2014. Grimaldi, J.V., A. Loten and V. O’Connel (2013), Chinese Investors Get Picky over US Visa-for-Cash Deal. Wall Street Journal. Online: http:// online.wsj.com/news/articles/SB10001424127887324445904578285 863761735122. Retrieved: 01/09/2014. 2 / Kälin, C. (2013) Global Residence and Citizenship Handbook: Third Edition. Zürich: Ideos. 3 / GAO (2005), Immigrant Investors: Small Number of Participants At- tributed to Pending Regulations and Other Factors. Online: http://www. gao.gov/products/GAO-05-256. Retrieved: 01/09/2014.

41 Overview: United States Although it seems to make sense to require a lower amount for investments in targeted areas, it also gives The United States EB-5 program stands out among double advantage to the Regional Center projects. Not the global citizenship programs by the required active only do they require a lower investment amount, they involvement of immigrant investors. The two-tiered struc- also require less active involvement – something that ture of the regular and the Regional Center track directs is known to be appealing to immigrant investors. Per- the investments either to risky investments, which are haps it would make sense to increase the requirements expected to generate high economic benefits, or alter- to match or even exceed the required amount for the nately to disadvantaged areas. regular track. There may be reasons to expect that this will also raise the profile of the project developers at the Regional Centers, but that remains to be seen.

Figure 12. USA

Commitment requirements 10 9 8 7 6 5 4 Investment Transparency 3 requirements 2 1 0

Social capacity Economic weight

42 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs United Kingdom The competitive landscape has changed considerably for the UK with several European countries introducing The UK Tier 1 investor route was introduced in 2008 and programs. As a large migrant-receiving country with an the uptake steadily increased since then. In 2011, the attractive international business climate, it seems that program was redesigned with the intention to attract a the UK nevertheless sees opportunities to increase de- higher number of applicants. To this end, two fast-track mands for investors. routes were introduced for immigrant investors who are willing to allocate a higher amount. Although the num- I do not think we are particularly aware of evidence ber of applications has almost doubled since then, the to suggest that take-up of the route as it is currently extent to which the policy changes caused this increase constituted has been strongly influenced by fac- is unclear, particularly since there have been very few tors external to the UK. (…)People coming to the applications to the fast-tracks. UK through this route decide first that they want to come to the UK and then look at the options avail- In 2013, the UK accepted 1,590 investors under this able to them. I do not think there is much to suggest scheme, about 17 percent of the Canadian program. that they compare the investor routes in various countries and then make a decision on where to go Figure 13. Total applications to the UK based on that. (…) The UK should not really engage in a race to the bottom of who can offer the cheap- 1,800 est investor route, because that reduces the actual benefits of the route to the country offering it.

- Representative, Home Office, UK 1,200 The minimum investment amount has actually not increased since its introduction and the UK government 600 is currently revising its investor program, particularly considering the required investment amount.

0 There are fundamental questions being asked of 2009 2010 2011 2012 2013 whether this route delivers any benefits to Britain at

all. And I do not think that it would be a concern that if you raise the threshold that it would be less com- Investment requirements petitive, because we are talking about, you know, we are talking about very rich people and the threshold The minimum required investment for this category in in Britain is currently so low that if people really want the UK represents 46 average annual incomes, making to come to Britain, I do not think they would mind the investment into a reasonable economic contribution. paying more. Relative to the total size of the UK economy, however, it - Researcher, Migration Advisory Committee, UK makes up a rather small investment sum. Apart from the size of the contribution to the UK econo- Looking at competitors with similar quality of life and my, however, questions have also been raised about the travel access, the UK price point leaves Canada and the economic benefit flowing from the types of investments U.S. behind, but is set below Australia and New Zealand. supported by the program.

43 The program leaves the choice for the type of invest- Commitment requirements ment up to the market.1 Anecdotal evidence suggests that investors in those cases almost exclusively go for The UK program is a residency program, offering a the safest options, particularly government bonds. This conditional residency at first, and an indefinite leave to is notably true for the UK case. In this program, invest- remain after five years of residency.4 Out of these five ments in business are required to generate a certain per- years, 50 percent of the time has to be spent in the centage of revenue. If this target is not met, the investor UK. The residency requirements, however, are eased needs to top up the investment before it matures. This for investors bringing in a higher amount. The five-year makes these investments particularly risky compared to residency period is applicable for investors investing the government bonds.2 minimum amount of a million pounds (about US$1,7 million). For applicants investing 5 million pounds, the resi- The only possible benefits could be that either the extra dency period is shortened to three years. An even higher loan allows the government to realize objectives it would investment, of ten million pounds, reduces the residency otherwise not be able to finance, or that the increased period with another year, to two years in total. demand from the immigrant investors would drive down interest rates. The Migration Advisory Committee con- The distribution of applicants over these categories is cludes that the first scenario is not very likely in a coun- not made public. However, again supported by anec- try with a well-functioning bond market: ‘Presently, the dotal evidence from the MAC (2014), it seems that the annual aggregate loan via the investor route is equivalent incentive of the reduced residency period is not sufficient to less than two days of our budget deficit’.3 Considering to encourage investors to take the fast-track options. the marginal contribution immigrant investors make to The main hurdle seems to be that the benefits of faster the UK economy and national debt, it is unlikely that they citizenship status are available only to the immigrant in- will drive down bond prices. Interviewees in this study vestors themselves, not their qualifying family members. agreed that: Transparency Even from a theoretical perspective it is difficult to imagine how encouraging investments in govern- The UK seems to have been influential with its decision ment bonds could possibly benefit the UK economy. to conduct an evaluation study. Internationally, several governments have followed this example. The evaluation - Researcher, Migration Policy Institute, U.S. also brought to light what information is still missing in order to enable a thorough assessment. The poor economic performance of the program is a sensitive issue. A particular difficulty is assessing to what extent immigrant investors move their lives, families and businesses You are making available access to permanent to the UK. residence and eventually citizenship for, basically, wealthy people. And of course, in many countries One of the key areas we wanted to investigate – citizenship is considered to be very important and the value added provided by investors carrying out you have to have, you do not want to give it away further business activity in the UK – was also very too easily, even for money. But if you give it away – if difficult to find hard evidence for. We were told an- you give access to citizenship or to permanent resi- ecdotally that investors do provide these additional dence available, then you have to make sure that the benefits and that the UK would therefore benefit a arrangements are delivering a lot of value for you. great deal. However, next to no evidence was pro- And the current arrangements in Britain are not. vided to back up these claims.

- Researcher, Migration Advisory Committee, UK - Representative, Home Office, UK

1 / See for information on the program requirements: Kälin, C. (2013) Global Residence and Citizenship Handbook: Third Edition. Zürich: Ideos. 2 / Migration Advisory Committee (MAC) (2014). Tier 1 (Investor) Route: Investment Thresholds and Economic Benefits. Online: https:// 4 / See for information on the program requirements: Magrath, C. and www.gov.uk/government/uploads/system/uploads/attachment_data/ B. Sheldrick (2013), United Kingdom. In: Magrath (ed.) The Corporate file/285220/Tier1investmentRoute.pdf. Retrieved: 01/09/2014. Immigration Review: Third Edition. London: Law Business Research 3 / Idem: p. 1. Ltd.

44 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Overview: United Kingdom With regard to the investment amount, the most important suggestions are to raise the required amount and The UK government is currently in the process of encourage investment in more beneficial types of in- responding to the findings of the Migration Advisory vestments than government bonds, possibly by restrict- Committee. Future changes to the program are likely to ing the permission to invest in bonds to only a certain develop in the directions suggested by this report. percentage of the total investment.

Figure 14. UK

Commitment requirements 10 9 8 7 6 5 4 Investment Transparency 3 requirements 2 1 0

Social capacity Economic weight

45 New Zealand The New Zealand program seems quite comparable to the UK program, allowing the market to decide the The New Zealand investor policy was redesigned in 2008 supported investments. Similar to the UK, the result is and received an increasing number of applications over that in New Zealand most applicants choose relative- the past years. Overall, the number of immigrant inves- ly conservative investments, particularly government tors applying to the New Zealand program remains quite bonds. However, this is considered less of a problem low, with a total number of 374 visas issued in 2012. in New Zealand than it is in the UK, mainly because the human capital of immigrant investors is considered more Interviews suggested that the demographics of the New important than the initial contribution they make to meet Zealand immigrant investors differ from those in other the requirements of the program. programs, with a larger share migrating from Europe and the United States. If we have got investors who are still active, who are still interested in – even though they have made their Figure 15. Total applications to New Zealand money, they are still commercially active (…) – if we can have a little bit of that energy and access to their 400 commercial expertise and international connections,

350 then I think that really works with small countries like New Zealand. 300

250 - Policy advisor, Immigration New Zealand

200 [The programs] are really much more about bringing in the human capital than the financial capital. The 150 financial capital is almost more of a prop. (…) Yes, 100 they are rich, but what we really want is their know-

50 how and their business leverage and their linkages through to foreign markets, that is the important 0 thing that we are looking for. 2008 2009 2010 2011 2012 2013

Investment requirements - Policy manager, Immigration New Zealand While this is an interesting finding, it is difficult to back The minimum invested amount in New Zealand is rela- this up by data to evaluate the extent to which these tively high, compared to competitors such as the UK, ancillary business and investment activities are actually the U.S. and Canada. Different stakeholders claimed that occurring, since most data gathering takes place during New Zealand plans to compete with other programs on the application processes and does not take a more efficiency of processing rather than price point. long-term view of the activities of Immigrant Investors. I think what New Zealand will do is make its systems The lack of data is around what happens on the me- much more transparent and easy to do. So it will dium or long term. We need to track these investor not mean that the thresholds you are required to immigrants much more carefully and talk to them meet will necessarily be lowered, but it might mean about what has worked and what has not worked. that you – the ease with which you can get in to the So there is a lack of longitudinal data. country will be improved. - Researcher, Massey University, New Zealand - Researcher, Massey University

46 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs We recommend that this should be more thoroughly Transparency assessed in order to decide whether the initial required investment is indeed only a first step that leads to more New Zealand is currently conducting an evaluation study investment and business activity. After all, evidence from of the investor program, which would be the first gov- other programs suggests that it is not typical for inves- ernment-led initiative to this end. However, there are a tors to move their business and/or investment activities lot of public data available, including some estimates of to the country where they obtain second residency/cit- the tendency of immigrant investors to remain in New izenship. If this is true for New Zealand as well, it would Zealand – although not a number of how many obtain make sense to require somewhat more economically citizenship rights. beneficial investments than government bonds. Respon- dents suggested that evidence for ancillary business activity remains largely anecdotal and solid outcomes are difficult to obtain.

There are some pretty basic indicators of how much money has been invested. The problem that we have with these guys – and this is something that we have to work out – is that many of them are very private. And I can get anecdotes and information, say, off some of the banks. (…) They would tell me: ‘Well, the investors have invested, as well as their investment funds’ – which they have with us in a portfolio – ‘they have invested between them 400 million dollars’. (…) I think it is one of the things we have to crack instead of measuring the impacts. We got lots of good stories but nothing, no kind of coherent stream of robust data.

- Policy advisor, Immigration New Zealand

Commitment requirements

Again similar to the UK program, the New Zealand program offers a fast track for immigrant investors that commit to a higher amount. In this case, the fast track requires a minimum invested amount of NZ$10,000,000. In contrast to the UK program, however, anecdotal evidence suggests that the fast track has clear advantages for those who can afford to go for this category.

I have not seen many people who fall in the middle, or who could go for investor plus, but decide to go for investor two because it is less money to invest. (…) The application process is much more straightforward; there is no age requirement, there are no English language requirements and there is no need to show they have got business experience and whatever, business management experience or ownership experience, so there is a whole lot of documentation that is not required. It is a much more straightforward application process and the investment period is shorter.

- Immigration Lawyer, Fragomen, New Zealand

To apply for citizenship, immigrant investors have to take the same steps as other immigration categories. The In- vestor Plus category, the ones investing NZ$10,000,000, are fast tracked and receive citizenship status about a year faster than other applicants.

47 Overview: New Zealand

Stakeholders in New Zealand were remarkably more positive on the global citizenship program across the board than in any of the other countries. There is a stronger sense that immigrant investors actually use the migration track to settle in New Zealand and move their families, lives and business activities there. For that reason, there are high expectations of secondary benefits of attracting migrants with high human capital.

Figure 16. New Zealand

Commitment requirements 10 9 8 7 6 5 4 Investment Transparency 3 requirements 2 1 0

Social capacity Economic weight

48 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Bulgaria I am not a bonds person, so I do not know what the money is doing to Bulgaria. I would have loved to Bulgaria passed legislation their program in 2009, when see something more tangible, like, as I told you ear- it formed part of policies to create a more attractive lier, something that you feel physically is contributing business environment.1 At the time, Bulgaria was the to Bulgaria. first European country besides the UK to offer residency through investment. - Immigrant investor who has obtained residency rights in Bulgaria Investment requirements Other options would have allowed this immigrant inves- The Bulgarian program is modeled after the Canadi- tor to make a more personal business choice, something an federal program.2 It grants permanent residence to that makes the acquiring of a residency permit less like a investors who invest one million Bulgarian levs, which transaction. Furthermore, it may generate public accept- is the equivalent of just over half a million euro (the local ability, as the outcomes of the program become more currency is pegged to the euro at 1.95583). The amount visible. is economically significant, representing 49 times GDP and 55 times external debt per capita. It should be noted that the Bulgarian legislation provides for ample other investment opportunities that can lead Comparable to the Canadian program, immigrant to residence, including entrepreneurial options with job investors have only a single option to invest in govern- creation, investment in bonds of locally registered en- ment bonds. Again in a similar way, a financing option is terprises, investment in real estate, and other.3 Although available, under which the investment can be a loan. This there are persistent legislative efforts in the last years to is more costly, but allows immigrant investors to pay a improve investment incentives through such legislative lower price upfront. mechanisms, until recently, these endeavors have not been accompanied by sustainable marketing support Considering that Bulgaria currently has more competitors and promotion on a governmental level. such as Malta and Cyprus that do not offer financing options, it might be possible to restrict the use of financ- Commitment requirements ing. Loans from Bulgarian banks do not bring in foreign investments, but move money that was already in the In 2013, Bulgaria has amended its legislation to make Bulgarian economy. Requiring the full amount to be at it easier for a foreign investor to obtain citizenship risk seems to make more economic sense. rights provided that certain conditions are met. Physi- cal presence requirements and the language test have Similar to the Canadian program, another possible been waived for investors.4 Faced with increased offer of improvement would be to offer a wider range of invest- global citizenship programs within Europe, these policy ment options. One immigrant investor who participated changes may have been necessary to maintain Bulgar- in this study confided that an investment in bonds was ia’s competitive position. Nevertheless, these regulations not what he would normally have preferred. Instead, he do change the extent to which Bulgaria asks immigrant would have seen benefits in investing in tangible assets investors to commit to the country. The program cur- and mentioned agriculture as an example for which Bul- rently scores at the lower end of the scale for Immigrant garia would offer interesting opportunities. Investor Programs.

1 / See for information on the program requirements: Videva, L. (2013), 3 / See for information on legislation and policy: Videva, L. (2013), Bulgaria. In: Magrath (ed.) The Corporate Immigration Review: Third Bulgaria. In: Magrath (ed.) The Corporate Immigration Review: Third Edition. London: Law Business Research Ltd. Edition. London: Law Business Research Ltd. 2 / See Bayat Migration Services, Bulgaria. Online: http://ilsgroup.com/ 4 /Arton Capital (2013), Bulgaria: New legislative amendments are now bulgaria.html. Retrieved: 12/09/2014. official. Online: http://www.artoncapital.com/news/bulgaria-new-legislative-amendments-are-now-official/. Retrieved: 01/09/2014.

49 Transparency Overview: Bulgaria

Bulgaria does not seem to market the opportunity to For a country where the economic contribution of the obtain permanent residence and/or citizenship by way of Residence by Investment Program are relatively high, it investment. This may be the most important reason why may make more sense to openly support this program no data has been published on the number of applica- as a way to migrate to Bulgaria. Such public support tions to the program, the investment amount they raised should be complemented with more openly available or what these investments have been used for. information on the uptake of the program and evaluation of its outcomes.

Figure 17. Bulgaria

Commitment requirements 10 9 8 7 6 5 4 Transparency Investment 3 requirements 2 1 0

Social capacity Economic weight

50 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Saint Kitts and Nevis Commitment requirements

The Saint Kitts and Nevis Citizenship by Investment Immigrant investors can obtain Saint Kitts citizenship Program was the first global citizenship program in 1984 without ever setting their foot in the country. Although in response to an economic downturn.1 The program this gives the Federation an attractive competitive posi- recently caused international concern when several tion, it also makes it vulnerable to a criticism of ‘selling individuals with Saint Kitts and Nevis’ passports obtained passports’. through investments were identified as sanction-evaders.2 Local media fear political ramifications from the U.S. and Transparency perhaps even Canada and the EU.3 Saint Kitts and Nevis is notorious for not sharing any Investment requirements details or outcomes of their global citizenship program. The Sugar Industry Diversification Fund publishes some There are different price points for different types of information on what projects the contributions through investments. The lowest amount is US$250,000 for immi- the program are used for, but other than that there is no grant investors paying a contribution amount to the Sugar indication the number of immigrant investors the country Industry Diversification Fund. This amount represents receives annually, where these investors originate from, 22 times the average annual income and 13 times the how much time they spend in the country or what type external debt per capita. Another option is to invest in of investments they pursue. government pre-approved real estate projects where the investment entry level is US$400,000 for a single applicant. Government fees apply in addition.

1 / See for information on the program requirements: Mitcham, C.V., R. Anseur and S.M. Bayat (2013), Saint Kitts and Nevis. In: Magrath (ed.) The Corporate Immigration Review: Third Edition. London: Law Business Research Ltd. See for information on the program requirements: Kälin, C. (2013) Glob- al Residence and Citizenship Handbook: Third Edition. Zürich: Ideos. 2 / Caribbean News Now (2014), Three Iranians with St Kitts-Nev- is Passports Identified as Sanction Evaders. Online: http://www. caribbeannewsnow.com/topstory-Three-Iranians-with-St-Kitts-Nev- is-passports-identified-as-sanctions-evaders-20449.html. Retrieved: 01/09/2014. 3 / The Daily Observer St Kitts (2014). So What? Well, Now What? On- line: http://www.thestkittsnevisobserver.com/2014/05/23/commentary. html. Retrieved: 11/09/2014. The Daily Observer St Kitts (2014) US Issues Advisory Against SKN Citizenship By Investment. Online: http://www.thestkittsnevisobserver.com/2014/05/23/citizenship-by-investment.html. Retrieved: 11/09/2014.

51 Overview: Saint Kitts and Nevis Second, Saint Kitts and Nevis may also benefit from somewhat higher commitment requirements to its ap- Saint Kitts and Nevis form an example where the lack of plicants. This can contribute to raising the profile of the transparency on a Citizenship by Investment Program program – the current possibility to become a Saint Kitts has eroded international political trust. In the absence of and Nevis citizen without ever visiting the country is often any information on how many immigrant investors are quoted in media and makes the program seem like a applying, from what parts of the world, and how their means to sell citizenship. financial and political backgrounds are scrutinized, all actors may expect the worst. Especially in a small country The extent to which higher commitment requirements where immigrant investors may easily make up a signif- would trump demand could be a topic of debate. With icant share of the population and national immigrant in- the introduction of the Antiguan program, one of the take, there is a risk of the international community losing main regional competitors has chosen to be more de- faith in the Saint Kitts and Nevis passport. Transparency manding. Furthermore, part of the decreasing demand is therefore the first recommendation. may be mitigated by the extra consumption effects flowing from immigrant investors’ visits.

Figure 19. Saint Kitts & Nevis

Commitment requirements 10 9 8 7 6 5 4 Transparency Investment 3 requirements 2 1 0

Social capacity Economic weight

52 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Antigua and Barbuda Such steps towards streamlining the administration and the strategic managerial processes will undoubtedly con- The Antiguan program was introduced in 2013 and tribute to the positive development of the program. offers immediate citizenship to investors. With the first passport issued to an immigrant investor in February Investment requirements 2014,1 llittle can be said about the program’s performance so far. Expectations are that the program may The program has different price points for different types 6 rise as much as US$100 million and boost investments of investments. Currently, the lowest priced option from countries such as China, Russia, and the Middle is most costly in the long-term, since this concerns a East.2 contribution amount to the National Development Fund. During the program’s introduction period, this option The program has caused considerable political resis- only cost US$200,000 for a family of four, and recently tance, up until the point that the opposition pushed for this offering period has been extended to April 30, 2015. a referendum.3 Currently, however, the program has After this date, the amount may rise to US$250,000.7 survived a government change4 and thus seems to have found public support. Alternatives are to invest in real estate or businesses. Although the required amounts are higher in those cases From a comparative perspective, Antigua and Barbuda – US$400,000 and US$1,500,000 – the potential return has a dedicated citizenship by investment government on the investments make these in the long term more unit and local processing agents like elsewhere in the profitable for the immigrant investor. Caribbean where global citizenship programs are established. Two strategic moves, however, might contribute Stakeholders who were personally involved with immi- to the sustainable development of this program. One is grant investors observed that available options where the decision to contract technician who has worked in lower amounts are paid up front are usually the most the Canadian program for many years for the set-up of attractive to this highly entrepreneurial target group. This the Citizenship by Investment Unit at the initial stage. is so because such options leave applicants with the And the other is the recently announced decision of the largest possible sum to invest in more profitable or more government to establish the Citizenship by Investment familiar types of investments. Consistently, it seems that Board that will be responsible for the organization and immigrant investors who obtained citizenship in Antigua the management of the Citizenship by Investment Unit.5 and Barbuda have almost exclusively paid the contribution amount. 1 / The Daily Observer Antigua (2014). First CIP passport sold. On- line: http://antiguaobserver.com/sold-1st-cip-passport/. Retrieved: Some stakeholders expect the number of investments 11/09/2014. in real estate projects to increase in the near future, as 2 / The Daily Observer Antigua (2014). CIP gets thumbs up. On- the sector will slowly become more attuned to immigrant line: http://antiguaobserver.com/cip-gets-thumbs-up/ Retrieved: 11/09/2014. investors. 3 / Caribena (2013). Opposition proposes CIP referendum. Online: http://www.caribantigua.com/antigua/news/politics/103307-opposition-proposes-cip-referendum.html. Retrieved: 11/09/2014. 6 / See for information on the program requirements: Kälin, C. (2013) 4 / The Daily Observer Antigua (2014). CIP will continue under ABLP Global Residence and Citizenship Handbook: Third Edition. Zürich: Prime Minister says. Online: http://antiguaobserver.com/cip-will-contin- Ideos. ue-under-ablp-prime-minister-says/ Retrieved: 11/09/2014. 7 /Antigua and Barbuda Citizenship by Investment (Amendment) Act 5 / Antigua and Barbuda Citizenship by Investment (Amendment) Act No. 7 of 2014. No. 7 of 2014.

53 There is simply not enough inventory in terms of real immigrant investors to the country.9 While due diligence estate at the [US$]400,000 threshold, at that bench- is obviously key to mitigating such concerns, the more mark. They are normally in the six, seven or eight symbolic oath and physical presence criteria may help to hundred thousand-dollar region. So that in and of raise the profile of the program. itself has caused, you know, a number of applicants to gravitate to the national development fund, which Transparency is seen as quicker and hassle-free. Eventually, we do expect some migration away from the national de- Considering that the first application to the Citizenship velopment fund into the real estate, as consultants by Investment Program was processed in February this and advisors do advise their clients on the benefits year, conclusions on transparency of the program would thereof. be premature. There have not been any official publications yet, but for this study, the interviewed stakeholders - Authorized representative for Antigua and Barbuda were happy to share some initial figures.

Channeling a larger share of investments into real estate The program aims to publicize key indicators of the may advance economic benefits, since real estate program’s performance on an annual basis. It is not yet investments may generate jobs and spillover effects. In clear, however, whether this will actually take place and any case, it would be hard to deny the economic bene- what indicators will be publicly available. fits of a contribution amount that represents 14 times the GDP and 38 times the external debt per capita – provided that it is well-managed and used productively.

Commitment requirements

While the investment requirements in the Antigua and Barbuda are very similar to its regional competitors, the commitment requirements are considerably more demanding. Investors are required to physically visit Anti- Commitment gua and Barbuda for the application process and pledge requirements an oath. As a condition to renewal of the passport, they 10 were initially required to spend 35 days in the country 9 over a five-year period. This requirement however has recently been reduced to five days.8 Apart from support- 8 ing the tourism sector, an implicit expectation is that the 7 required time spent in the country will draw the attention 6 of some of these immigrant investors towards local business opportunities. 5 4 We are dealing with significant applicants and many Investment Transparency 3 who are actually going to end up spending a fair bit requirements of time here and if they are entrepreneurial persons, 2 then they spend time here and see there are oppor- 1 tunities. It is just a question of linking the people in 0 this program with other aspects of economic development in the country.

– Representative, Citizenship by Investment Unit, Antigua and Barbuda

Besides serving economic goals, the higher commitment criteria may also mitigate some of the sociopolitical risks of global citizenship programs, which can be more pronounced in smaller countries. The U.S., for example, has already expressed concerns about the legitimacy of Social capacity Economic weight

8 / The Daily Observer Antigua (2014). Parliamentarians make 9 / The Daily Observer Antigua (2014). USA warns banks about dirty changes to CIP. Online: http://antiguaobserver.com/parliamentari- CIP money. Online: http://antiguaobserver.com/usa-warns-banks- ans-make-changes-to-cip/. Retrieved: 11/09/2014. about-dirty-cip-money/. Retrieved: 11/09/2014.

54 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Overview: Antigua and Barbuda The fact that immigrant investors are unlikely to actually settle in Antigua and Barbuda, but make up a significant In a small economy, a Citizenship by Investment Program share of the national immigrant intake, creates higher can easily make a tangible contribution. political risks. Antigua and Barbuda has obviously and sensibly imitated large parts of the program design of its Just anecdotally, in my time here there was no regional competitors, but at the same time, efforts are interest – you never saw any foreigners in Antigua made at the design stage to mitigate some of the poten- looking at any economic development – but since tial political drawbacks. the CIP has come on board, we have seen a large amount of interest and people coming to look at real A further opportunity to positively distinguish the pro- estate projects and thinking of buying real estate to gram would be to create more transparency on its build new projects. performance. Obviously, the current lack of transparency in other programs decreases the pressure on Antigua - Representative, Citizenship by Investment Unit, and Barbuda to be more forthcoming with the program’s Antigua and Barbuda outcomes. This illustrates why now would be an appropriate time to establish international guidelines around such issues.

Figure 20. Antigua & Barbuda

Commitment requirements 10 9 8 7 6 5 4 Transparency Investment 3 requirements 2 1 0

Social capacity Economic weight

55 Recommendations

This report evaluates three areas of concern that all immi- it would be beneficial for governments to cooperate grant investor programs confront: maximizing economic with each other, including on an exchange of informa- benefits, maintaining public acceptability, and preserv- tion regarding best practices, due diligence collabora- ing legitimacy. The findings of this report, based on the tion, promotional campaigns, how to better respond systematic analysis, research, and interviews with key to public concerns, and joint reports and analysis. stakeholders are summarized in the below key recommendations: 7. Governments that only offer a residency by investment program should track and publish information 1. In order to maximize the economic benefits of global on how many investors go on to obtain citizenship citizenship programs, governments should conduct status. Currently, there is no such information. Such regular review of the programs’ price point. details would enhance transparency, public confidence, and enhance policymaking. 2. Wider range of investment options (i.e. passive and active), rather than adoption of a narrow path, which 8. Given the number of European countries that have restricts everything into one exclusive category. This recently entered this investment policy space, and would have the benefit of appealing to a wider com- given some concerns expressed by the European munity of investors. Commission, it would be advisable and helpful if a European-wide seminar or conference was orga- 3. Governments should be encouraged to channel the nized. Discussion among the EU Member States, generated revenues into areas of domestic jurisdic- including presentations from countries that have tion that have the greatest economic benefit for their already enacted IIPs, would enhance understanding citizens. on both the opportunities and challenges, and be a step towards greater coordination. 4. Governments need to have greater transparency. The public deserves to know the number of applicants, 9. Governments should dedicate more efforts in explain- the revenues generated, and how and where these ing and educating their citizens on the rationale for monies have been invested in the national economy. their IIP, in an effort to create more public awareness More openness will lead to greater public support, and confidence. and allow for much better policymaking in the longer term. 10. Participating governments should consider establish- ing a permanent Forum, through which this inter-gov- 5. Given that investors to the country make an econom- ernmental cooperation can regularly and freely flow. ic contribution beyond the investment minimum, such As part of such a Forum, governments should consult as through ancillary businesses, other investment and work in cooperation with relevant stakeholders. activities, and high-level consumption expenditures, governments should make an effort to calculate this The methodology that this report proposes can be used more comprehensive figure, as it relates to overall as grounds for further research in the field of governance economic impact. and management of global citizenship programs. Such research should engage the complete range of stakeholders 6. Participating governments should cooperate and involved in these programs and should serve as a platform collaborate more with each other. Starting with one for regular analysis and assessment of the social and government in 1984, there are now some 20 coun- economic impact from the implementation of global citi- tries that offer residency and/or citizenship through in- zenship programs, and for endorsement, sustaining, and vestment. And this number will continue to rise. Thus, enrichment of industry benchmarks and best practices.

56 Global Citizenship: A Pilot Report on Enhancing the Understanding of Global Residence and Citizenship Programs Arton Capital empowers individuals and families to become Global Citizens. This is accomplished through a high-end service experience, which simplifies complexity and is supported and sustained by long-term relationships.

As a global financial advisory firm, specializing in investor programs for residence and citizenship Arton plays a critical role in helping governments, consultants, legal and financial professionals and investors to meet their goals quickly, efficiently and more effectively.

Furthermore, as an industry leader, Arton curates the Global Citizen Forum, where delegates, government representatives and industry patrons meet annually to exchange, build awareness, educate and promote global citizenship.

Arton’s global operations are spread in over 10 offices around the world and it oversees over US $1 billion investments in Global Citizen programs. Arton Capital is a member of The Arton Group, which comprises of fully licensed banking, financial advisory and investment consulting companies tailored to the needs of global citizens.

DUBAI Emirates Towers, Level 41, Sheikh Zayed Road, P.O.Box 31303, Dubai, United Arab Emirates T +971 4 319 7665 F +971 4 330 3365

MONTREAL 1, Westmount Square, Suite 1810, Montreal, Quebec, H3Z 2P9, Canada Toll-Free (US, Canada): +1 855 935 6665 T +1 514 935 6665 F +1 514 935 5622

SOFIA 47, Moskovska Street, Floor 4, Sofia 1000, Bulgaria T +359 2 439 1464 F +359 2 439 1461

www.linkedin.com/company/arton-capital

www.twitter.com/artoncapital

www.facebook.com/artoncapital.inc

www.youtube.com/user/artoncapital

[email protected] | www.artoncapital.com About the Global Agenda Council on Migration The Global Agenda Council on Migration agreed to address the growing negative sentiment on migration as well as weaknesses in policy-making on migration, namely the absence of private sector and economic perspectives. It focuses its efforts on “new thinking”, developing arguments based on the contributions migration makes to the economy and society, and making the case for including the private sector as an equal player in migration policy-making. The Council has completed a series of case studies on business and migration, including a white paper, The Business Case for Migration, submitted to the President of the United Nations General Assembly in May 2013, telling the positive story of migration and emphasizing the important role business already plays in the process.

About the World Economic Forum The World Economic Forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. Incorporated as a not-for-profit foundation in 1971 and headquartered in Geneva, Switzerland, the Forum is tied to no political, partisan or national interests.

World Economic Forum 91–93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 22 869 1212 Fax: +41 22 786 2744 [email protected] www.weforum.org The Global Citizen Forum’s mission is to identify, develop and disseminate innovative strategies, policies and benchmarks in global migration of high net worth individuals.

The Forum brings together government officials, industry and business leaders, and philanthropists to share insights on attracting foreign direct investments, to provide guidance on becoming global citizens and contribute to the sustainable growth of the global citizenship industry.

The GCF is a not-for-profit organization, founded and curated by Arton Capital.

[email protected] www.globalcitizenforum.org